Key facts
- Data center construction spending surged 73% in the past year.
- Spending on other private nonresidential construction fell 5.9%.
- High financing, land, labor, and material costs are discouraging development in housing and industrial sectors.
- Data centers contribute to cost pressures in certain regions through longer equipment lead times and tighter labor markets.
- Interest rates, affordability, office vacancy, and post-pandemic oversupply are cited as reasons for the slowdown in office, retail, and housing construction.
Construction firms in Europe are experiencing a boom in data center development, driven by AI infrastructure demand, which saw spending surge 73% in the past year. However, this growth has not been enough to offset a broader slowdown in residential and industrial construction. High financing, land, labor, and material costs, coupled with regulatory challenges, are hindering development in these sectors. Experts note that while data centers contribute to cost pressures in specific regions, they are not the primary cause of the overall construction slowdown, which is attributed to factors like interest rates and market oversupply.