Bright Future for Data Centre Construction?

Stephen Whatling, Chairman at BCS (Business Critical Solutions) writes about data centre construction in this latest feature for UKCO.

Over the past few years our twice-yearly independent survey of over 3,000 professionals across Europe has seen a continuing demand for and lack of supply of data centres.  In fact the proportion of developer and investor respondents reporting an increase in their portfolio of technical real estate has remained above nine out of ten. This has been driven through building activity which is great news for the construction industry.

Understandable Caution

However, in the last 6 months the picture is, perhaps understandably, very different. Despite a major uplift in demand for data traffic since March as a result of the Covid-19 pandemic, our latest survey has highlighted some caution in the sector, particularly amongst developers, with less than half planning to expand in the coming year. This is a substantial fall from the 93% and the lowest recording in eight years of this survey. This paints a worrying picture for the construction industry that has already been severely hit by the national lockdown and productivity issues associated with social distancing in the workplace.

Challenges Ahead

Moving forward it is also clear that Covid-19 has, and is continuing to have, a major impact on supply chains with 24% of respondents feeling real pain when it comes to the supply of raw materials for ongoing construction projects.  Local supply of materials has been an issue during lockdown, but many core products are sourced globally and there have been significant challenges when movement is restricted in parts of the extended supply chain, think of copper and cabling from China for example. This is likely to continue as we see the continuing global challenge of the virus.

Perhaps the most worrying finding is that almost 20% of respondents reported the cancellation of orders as the top ranked issue they face as a result of Covid-19.  In addition almost three-quarters of respondents expect Covid-19 to curtail data centre expansion plans in the next 12 months with just one in ten stating that they would not be changing their plans and the rest adopting a wait and see approach.

Pre-lockdown Concerns Continue

The impact of Covid-19 cannot be ignored or necessarily separated from other challenges facing the construction industry as even before the lockdown there were concerns amongst the developer community.  Around 90% of respondents that are directly involved in the building of data centres believe there is a continued lack of availability of skilled design and build professionals.  There is also a perceived lack of availability of operational staff with almost three-quarters of responders seeing this as an increasing problem that is making it more and more difficult to run facilities.  This, of course, leads developers to question the value of providing new facilities if they are going to be problematic to resource and operate.

Promising Signs

However, it isn’t all bad news. Although many developers have postponed non-essential construction only a quarter said that it would impact their expansion programme.  This suggests that they are confident in their ability to pick up plans as soon as lockdown eases adequately.

It also seems that the location of a data centre facility has been placed in the forefront of people’s minds as a result of the pandemic, with 57% agreeing that the issue is now more important, rising to 72% of developers. This likely reflects the concerns and challenges of construction and ongoing maintenance with the differing travel and lockdown policies from Governments across the world.  In which case construction businesses should expect a bow wave of demand when the situation allows and postponed projects are released by developers.

So there are some promising signs for the construction industry as it seems that previous levels of demand will return quickly but this will be against a backdrop of lack of availability of skilled resources will have further consequences. Almost three-quarters of responders have experienced increasing operating and labour costs, the highest ranking consequence of the lack of resources, just under 70% are pushing greater workloads on to existing staff and over one-third have experienced delays in  meeting deadlines, a similar proportion believe they have lost orders as a direct consequence of such shortages.

Beyond the bow wave created by Covid-19, it seems inconceivable that the demand for data centre construction will not return to previous levels of growth but in order to meet the demand the design and build sector does need to focus on investment, recruitment and training.  The top three solutions according to our respondents are greater industry engagement with educators, investment in automated processes and better directed Government investment. In conclusion, the future remains bright, but some clear challenges remain and unless these are resolved the sector may not be able to maximise the opportunities that are sure to exist.

If you would like to read more like this, then please click here