Data Center Construction Costs: What Drives the 2025 Spike

Data center construction costs have surged to unprecedented levels, reshaping the economics of one of commercial real estate's most dynamic asset classes. According to CBRE's North American Data Center Trends report, the average cost to build a data center has climbed from roughly $7.7 million per megawatt (MW) to over $10.7 million per MW — a nearly 40% increase in just two years.

These figures represent more than simple inflation. They reflect a structural transformation in what a modern data center actually is.

GPU Density Is Rewriting the Rulebook

The single biggest driver of rising costs is the shift toward GPU-dense computing environments. Legacy data centers were designed around CPU-based workloads drawing 5–8 kilowatts (kW) per rack. Today's AI training clusters routinely require 40–80 kW per rack, with next-generation deployments pushing toward 100 kW or more.

This density shift has cascading effects across every building system. Electrical distribution must be redesigned with higher-capacity switchgear and bus ducts. Structural loads increase as racks become heavier. Floor plans must accommodate larger mechanical rooms relative to white space.

Power Infrastructure: The Bottleneck That Multiplies Cost

Securing utility power has become the most expensive variable in data center development. In Northern Virginia, utility interconnection timelines have stretched from 12–18 months to 36–48 months or longer. Similar delays are emerging across the Sun Belt.

Developers are investing in on-site generation — natural gas turbines, battery energy storage, and dedicated substations — adding $1–3 million per MW to project budgets. Some operators are exploring co-location near nuclear facilities to secure long-term supply.

Utility commissions in Virginia, Georgia, and Oregon have signaled concern about grid impact, introducing regulatory uncertainty into permitting and rate structures.

Liquid Cooling: No Longer Optional

Traditional air-cooled data centers cannot efficiently dissipate heat from modern GPU clusters. Liquid cooling — direct-to-chip, rear-door heat exchangers, or full immersion — is now a baseline requirement for AI-oriented facilities.

CBRE estimates liquid cooling adds 15–25% to the mechanical construction budget compared to conventional raised-floor air cooling. Beyond hardware, it requires redesigned plumbing, water treatment infrastructure, leak detection systems, and structural reinforcement.

Labor Shortages Compound Every Cost

The skilled labor shortage is especially severe in data center work. The Associated Builders and Contractors estimates a national shortfall of over 80,000 electrical workers. Data center electrical work requires specialized certifications with medium-voltage systems that further narrow the qualified pool.

Labor costs for data center construction have increased 15–20% year over year in major markets, according to Turner & Townsend's International Construction Market Survey.

Supply Chain Pressures Persist

While pandemic-era disruptions have eased for most materials, data center-specific equipment remains constrained. Lead times for electrical switchgear range from 40–60 weeks. High-efficiency transformers take 52–78 weeks. Generators above 2 MW face similar backlogs.

What This Means for Developers

The cost spike is not cyclical — GPU density, power scarcity, cooling complexity, and labor constraints are structural. Traditional feasibility modeling using static spreadsheets struggles to capture these dynamic interdependencies.

At Build, we pair agentic AI with CRE domain experts to compress feasibility analysis from weeks to hours. Our platform ingests utility rate data, construction cost indices, labor metrics, and equipment pricing to generate dynamic cost models that update as assumptions change. In a market where a single MW can cost $10 million or more to deliver, the margin for modeling error is razor-thin.

AI-native tools don't replace experienced developers — they amplify their judgment, ensuring every assumption is tested and every scenario explored before the first shovel hits the ground.