Surging demand for artificial intelligence and an ongoing skills shortage are driving up the cost of constructing data centres in the UK, according to new research from Turner & Townsend. The global programme management company’s Data Centre Construction Cost Index (DCCI), now in its 10th edition, draws on more than 500 live or recently completed projects across 62 markets, alongside feedback from more than 400 industry experts worldwide.
The research found that London is the 15th most expensive location globally for data centre construction, with costs averaging $12.95 per watt.
One of the key factors influencing costs in the UK is a growing skills shortage. The rapid rise of AI is creating demand for increasingly large and complex facilities, requiring specialist technical expertise and experienced project management teams to deliver them. The challenge is particularly acute across the UK and Europe, where just 19% of survey respondents believe contractor capacity is manageable, compared with 52% globally.
Tim Collier, Director and UK Data Centre Lead at Turner & Townsend, said: “Demand for data centre capacity across the UK continues to accelerate, creating significant opportunities for investment while placing increasing pressure on labour availability, project delivery and costs. The UK remains one of Europe’s most attractive data centre markets, with London firmly established as a leading international hub. However, addressing constraints around power availability, grid connectivity and infrastructure delivery will be critical to sustaining long-term growth. The positive steps being taken by the Government, including NSIP reforms, AI Growth Zones and changes to the grid connection process, demonstrate a clear commitment to supporting digital infrastructure. While further progress is needed to fully realise the benefits of these initiatives, the continued focus on unlocking data centre development will help ensure the UK remains a highly competitive market for investment and growth in the years ahead.”
The report highlights how AI is driving a global race to deliver larger and more sophisticated data centre projects. More than half of respondents said they expect the majority of their projects by 2027 to support AI workloads.
As projects grow in scale, costs are increasingly being shaped by new delivery approaches, the need for specialist contractors and efforts to accelerate build schedules despite mounting capacity constraints. More than half of those surveyed reported construction cost increases of more than 6% during 2026, while around one in five experienced inflation exceeding 15%.
Looking ahead, respondents expect cost pressures to ease, with 28% anticipating inflation of between 1% and 5% in 2027 and 57% expecting inflation to remain below 15%.
Access to power remains a major challenge. More than half of respondents identified power availability as a key obstacle to project delivery, while 52% said utility connections typically take between one and two years. Almost a third reported waiting longer than two years.
Globally, Tokyo topped the index as the most expensive location for data centre construction at $18.28 per watt, followed by Osaka at $17.15, Zurich at $15.93, Singapore at $15.39 and Silicon Valley at $15.01.
The research found that Europe and North America continue to dominate the sector, with 17 European and 13 North American markets ranking among the highest-cost locations. North America is home to around half of the world’s data centres, while Europe accounts for approximately a quarter.
At the other end of the scale, Shanghai was the lowest-cost market at $5.79 per watt, followed by Mumbai at $6.83, Ho Chi Minh City at $8.32, Bogota at $9.13 and the UAE at $9.20. Lower labour costs have helped keep construction costs down in these emerging markets.
Paul Barry, North America Data Centre Lead at Turner & Townsend, said: “Over the decade since we first published our construction cost index we have seen the data centre industry transform, with capital expenditure on data centres now US$800 billion per year, and expected to reach US$1.8 trillion by 2050. AI’s exponential demand for computing power, combined with cloud adoption and the growing importance of data and sovereign capacity, is driving data centre investment and development at unprecedented scale, reshaping the construction landscape.
“However, rising material and labour costs continue to create challenges globally, while access to power, specialist equipment and skills continue to create bottlenecks. Data centres are also subject to increasing scrutiny, with political and community consent essential to delivery. AI-driven demand for gigawatt-level power and liquid cooling for increased rack densities is driving the growth of larger-scale data centres, but the shortage of skilled labour and the greater risks involved in the delivery of larger more complex projects is driving a cost premium.”
1 Source: PWC’s global AI infrastructure report .