The construction industry is experiencing an unprecedented boom in data center development, fueled by the explosive growth of artificial intelligence and cloud computing. According to Allianz Commercial's November 2025 analysis, global spending on data centers is expected to reach $7 trillion by 2030, with the United States and China serving as the primary drivers of this massive expansion.
The construction implications are staggering. Data center construction projects now range from $500 million to $2 billion for average-sized facilities, with some mega-projects exceeding $20 billion, according to Allianz Commercial construction experts. This represents a dramatic increase from historical project costs of $200-$300 million.
The United States will be the largest market for data center development globally. The US is expected to account for approximately two-thirds of total global data center power demand, with a projected 81 gigawatts (GW) capacity by 2028, according to industry analysis cited by Allianz Commercial.
China is building equally aggressively, with Beijing alone now accounting for roughly 10% of global hyperscale data center capacity. Europe is trailing behind the two superpowers but is experiencing significant growth, with a 43% annual increase in pipeline activity. Major European markets include London, Dublin, Amsterdam, Frankfurt, Paris, and Milan.
The scale of modern data center construction is remarkable. The biggest data centers have enormous footprints, with $20 billion-plus facilities involving tens of thousands of workers on site at peak construction times, significant equipment movement, and substantial building supply logistics, according to Chris Fancher, US Head of Construction Property at Allianz Commercial.
The construction challenges are substantial. Project timelines are tight, requiring expert coordination and specialized workmanship. Any missteps or faulty workmanship can lead to potential losses or costly delays that impact project budgets and schedules.
One of the main challenges facing data center construction is surging power demand that threatens to outpace electrical grid capacity and infrastructure. Electricity demand from data centers worldwide is set to more than double by 2030, reaching approximately 945 terawatts per hour (TWh) annually—slightly more than the total consumption of Japan, a nation of 124 million people.
To avoid power issues (which cause 45% of impactful data center outages), operators are increasingly seeking to reduce reliance on the grid. Data center operators are generating their own power on site through renewable energy, natural gas, and even potentially small nuclear reactors.
Water consumption represents another critical infrastructure challenge. Large data centers can consume up to 19 million liters of water per day—equivalent to the water use of a town with a population of up to 50,000. Increasing cooling requirements will drive up water and electricity demand significantly.
Rising global temperatures pose a growing resilience risk to over half the world's top data center hubs. Heat management, lithium-ion battery fire risks in server racks, and water scarcity are all significant construction and operational challenges that must be addressed during the building phase.
The major technology companies and cloud providers driving this construction boom are significant. The tech industry's big three cloud providers—Amazon, Microsoft, and Google Cloud—accounted for almost two-thirds of global cloud revenue in Q2 2025, combined with Chinese companies such as Alibaba and Tencent whose combined capital expenditure budgets for 2025 reach hundreds of billions of US dollars.
Much of this investment is directed toward industrial-scale infrastructure and dependable energy sources required for high-performance AI and cloud computing operations.
Data center construction represents one of the most dynamic and lucrative opportunities in the construction industry today. Contractors working on these projects face unique demands: specialized expertise in complex systems, tight timelines, massive scale, and sophisticated risk management.
Contractors and suppliers should expect increased demand for:
• Multi-disciplinary construction expertise (structural, electrical, mechanical, IT infrastructure)
• Specialized power and backup generation systems
• Advanced cooling and water management solutions
• Fire suppression systems for lithium-ion battery installations
• Renewable energy integration during construction
• Project-specific insurance and risk management
The complex nature of data center construction requires specialized insurance coverage beyond standard commercial policies. Project-specific policies are essential given the size and unique risk profile that demands specialized insurance, according to Allianz Commercial.
Risks include power supply concerns, faulty workmanship, fire, natural catastrophes, extended timelines, and business interruption exposure. Darren Tasker, Head of Construction at Allianz Commercial, emphasizes: "Construction projects as complex and extensive as data centers require significant time and resources. Typically, they require project-specific policies given their size and their unique risk profile that demands specialized insurance."
While data center construction growth is remarkable, questions remain about sustainability. Several factors could limit future growth, including surging construction costs and questions about future AI demand and potential over-investment, according to Allianz Commercial analysis.
However, current data shows no clear signs that growth has reached its peak. With $7 trillion in projected global spending through 2030 and the majority of that investment still ahead, data center construction will remain a dominant sector for the construction industry for years to come.
Source: Allianz Commercial (November 6, 2025) | McKinsey & Company industry analysis | International Energy Agency (IEA) data
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