A new report by global professional services firm Turner & Townsend has revealed a surge in data centre construction costs worldwide with the Middle East hot spots of Saudi Arabia and the UAE registering increases.

The global surge in AI and development of machine learning is fuelling a rapid expansion in the data centre market, according to the UK-headquartered firm’s 2024 Data Centre Cost Index released on Thursday

Saudi Arabia and UAE are the only Middle Eastern countries listed among the top 50 high-performing global data centre markets covered by the annual report, which also analyses the average cost per watt to build data centres in these markets.

Saudi Arabia, ranked 18th in the 2024 index, now has an average cost per watt of $10.80, up from $10.00 in 2023. The UAE, on the other hand, has moved to the 44th position with a cost of $8.80 per watt, compared to $8.35 the previous year.

The most expensive markets for data centre construction are Tokyo, Singapore, and Zurich at $14.30/W $13.80/W, and $13.20/W respectively.

“The Middle East’s data centre market is projected to grow from $5.57 billion in 2023 to $9.61 billion by 2029, driven by rising demand for digital services and major infrastructure investments from countries like Saudi Arabia and the UAE,” said Alan Coary, Regional Data Centres Lead, Turner & Townsend.

Coary highlighted sustainability efforts across the Gulf Cooperation Council (GCC), including renewable energy integration and innovations like liquid cooling systems and AI-driven management tools, which are boosting efficiency. However, challenges such as high initial investment costs and a shortage of skilled professionals could slow growth, he noted.

Price rises continue

Tender prices for data centre construction projects are expected to rise at a constant rate in the coming years, according to the report with 58 percent of the survey respondents reporting rises of 5 to 15 percent over the past 12 months, with a further 21 percent reporting more than a 15 percent increase.

The majority expect tender prices to continue rising at the 5 to 15 percent rate over the next 12 months, but about a third of respondents anticipate rises might slow to around a 5 percent increase. Globally, the overall average year-on-year cost increase across the 2024 index is nine percent, compared to six percent in 2023.

The report said many markets, such as Auckland, Vienna, São Paulo, Singapore, Querétaro and Cape Town have seen cost inflation on data centre projects above 20 percent – driven by low supply chain capacity and experience in material and talent.

(Editing by Anoop Menon) (anoop.menon@lseg.com)

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