Building stronger supply chains
Cost inflation, long‑lead equipment constraints and skills shortages continue to test delivery models. In this environment, stronger, more collaborative and better‑planned supply chains are becoming essential to maintaining momentum and protecting certainty.
In the face of mounting pressure, operators and contractors must secure their supply chains to keep their project timelines, their profit margins and their reputations intact, and to stay ahead of a fiercely competitive field. “The winners will be the developers who manage the supply chain effectively,” predicts AVK’s Pritchard.
In our previous Data Centre Trends reports, survey respondents predicted only modest price increases for materials and equipment. This year, their expectations are more realistic.
In 2025, for example, respondents expected the price of copper cable to grow 2.2% in the coming year, on average. This year, they’re expecting a 4% hike. For piling, the average expected increase has grown from 1.8% to 3.5%.
For equipment, the highest average price increase is expected for Battery Energy Storage Systems (BESS), up from 2.8% in 2025 to 4.3% this this year, followed by CRAC/CRAH, then BMS and security systems (Figure 7).
Figure 7. Operators and contractors expect significantly higher price increases for installed components and equipment in 2026 than last year. How do you expect the price of the following fabricated and installed components/infrastructure components to change in [the coming year]? (average percentage, operators and contractors)
Overall inflation is the main culprit behind these price rises, respondents say, but this is followed shortly by AI-driven demand for high-end compute capacity. If the AI sector’s ambitions are even partly realised, the supply chain could soon be stretched like never before.
Construction contractors are significantly more likely than operators to identify compliance costs, such as ESG regulations, as a driver of price increases. They may be anticipating the impact of the EU and UK Carbon Border Adjustment Mechanisms (CBAM), with the EU CBAM coming into effect in January 2026 and the UK counterpart in January 2027. The EU’s Omnibus simplification package significantly limits the number of importers affected by CBAM, and also impacts the thresholds and timelines for the CSRD (Corporate Sustainability Reporting Directive) and CSDDD (Corporate Sustainability Due Diligence Directive) ESG reporting rules. Nonetheless, the scale of data centre development means many projects will need to consider CBAM and other ESG requirements.
These measures will apply extra costs to imports of carbon-intensive materials, including steel and aluminium, based on their carbon footprint and whether they are subject to an emissions trading scheme. The cost implications and whether importers pass them onto their customers remain to be seen.
Three out of 10 respondents identify trade tariffs as a driver of price increases in 2026. Recent back‑and‑forth on tariffs and trade policy is a visible reminder that uncertainty, particularly around costs, is not going away. Rather than being a temporary disruption, volatility is becoming a structural feature of the market, reinforcing the need for delivery, commercial and cost strategies that can adapt as conditions change.
Materials and equipment are not the only resource whose scarcity can undermine the financial model of a data centre development. Skilled labour is also highly constrained throughout the supply chain. Survey respondents report that design and engineering skills and construction skills are the most limited (Figure 8).
Figure 8. Access to skilled labour is most constrained in data centre design, engineering and construction. How would you describe your organisation's ability to access skilled labour in the following functional areas? (percentage of operators and contractors)
This has a two-fold impact on projects, says Mercury Engineering’s Byrne. “When the supply chain is stretched, you pay a premium, but the value of the service is reduced. If you're paying 5% more for a service that's 10% less valuable, it’s a 15% hit to the productivity of your project.”
Addressing supply chain constraints
These challenges are surmountable, Pritchard says, as long as operators plan their new developments strategically. “If people don’t plan, we have a supply chain issue,” he says. “If they plan and give [suppliers] good visibility, it’s manageable.”
Buyers have matured significantly in the past few years, he adds. Still, there is ample room for improvement in mitigating supply chain delays and disruptions, our survey suggests.
The most widely adopted measure is to enter risk sharing partnerships with customers (Figure 9). For operators, this means partnerships with occupants (42%), and for contractors, with operators (43%).
However, both groups are less likely to enter risk sharing agreements with suppliers – 25% of operators regularly do this, and 20% of contractors. This reflects of the more transactional nature of supplier relationships. Our experience is that suppliers are likely to price any risk sharing model into their offer or demand a long-term commitment that limits an operator’s flexibility of choice.
Figure 9. Risk sharing partnerships are the most widely adopted measure to mitigate supply chains delays or disruptions. Which of the following does your organisation routinely use in order to mitigate the risk of disruptions or delays in the data centre construction materials supply chain?
* - options available to operators only ** - options available to construction contractors only All other options available contractors and operators involved in purchasing construction materials
Survey respondents acknowledge that adopting a standard and/or modular data centre design can ease supply chain constraints: six out of 10 agree that increased standardisation and modularisation will shorten delivery timelines and ease supply chain pressure by 2027.
Stephenson reports that standardising hscale’s base design to the new, higher-density norm gives it more time to negotiate with long-lead equipment (LLE) suppliers. “The benefit is consistency in our supply chain,” he says. “We won’t need to place our next LLE orders until the summer, but we’re negotiating MSAs now on standard equipment that doesn’t change with diverging customer requirements, so it’ll be ready with enough time to deliver to site. This also allows us to provide our investors cost certainty for about 40% of our base cost at a very early stage, while reducing capital at risk, thanks to best-in-market lead times.”
Mercury, meanwhile, has continued to evolve its off-site modular (OSM) construction to insulate itself from supply chain risks and improve project schedule delivery timelines. “We have developed and expanded our own OSM facility in Germany. This will be a central location for our prefabrication that supports projects in both Central Europe and the Nordics,” Byrne explains. AVK’s modular energy systems – its PowerPod units are tailored to each client’s specific requirements, then replicated as needed – minimise the requirement for design and engineering capacity, says Pritchard.
But despite the benefits, only 31% of operators ‘routinely’ use standard or modular designs. This is because they are not easy to pull off.
Firstly, the ability to standardise is limited by the diversity of needs and opportunities in Europe, says Byrne at Mercury Engineering. “A standard design should be a standard for what you're trying to sell,” he says. “If you're trying to be a provider in multiple geographies with multiple clients, you're not going to have one standard design.”
Modularisation, meanwhile, can be expensive. Whereas stick-built structures can be bolstered with additional beams or concrete, a modular unit needs to be able to provide the required resilience in one piece. And risk-averse architects will typically overengineer. A value engineering approach is required to ensure the right balance of flexibility, resilience and cost.
Around a third of respondents source materials and equipment from multiple suppliers. Diversifying its supply base has helped hscale to reduce its LLE costs. “We’ve worked with integrators who may yet not be household names, that are both mature enough to serve the industry and integrating traditional equipment brand names into hscale's innovative standard design,” says Stephenson.
This approach requires careful consideration. Data centre equipment comes under extreme pressure during operation, so quality measures and risk assurances from new suppliers are essential.
Even so, the combined impact of hscale’s LLE procurement strategy has been significant, Stephenson explains. “When we started with our base design pricing, around 45% to 50% of our total cost was long‑lead equipment. By exploring the market and getting to MSAs with suppliers, we’ve seen that share fall to 35% to 40%. That has a huge impact on the business case.”
For Pritchard at AVK, effective supply chain management boils down to three key factors: “Framework agreements, early engagement and transparency. Clients who give us visibility over the next three to five years allow us to have meaningful early conversations [with our suppliers].
“It’s about bringing the supply chain on the journey through early engagement, so everyone knows what they’re doing.”
Digitalising data centre construction
A significant proportion of operators and contractors are using digital innovation to help manage data centre construction projects and supply chains, according to our survey.
For example, around a third say they routinely use digital tendering platforms to procure materials and equipment, and nearly as many employ digital technology to track supplies and/or suppliers.
Even more claim to have embedded consistent information management practices – such as specifying information requirements and using a Common Data Environment (CDE) – into their data centre projects: 27% say these practices are fully embedded and a further 44% say they are used in most projects.
Our experience suggests that many respondents overstate the maturity of their digital initiatives, however. Few operators have moved beyond using a simple dashboard to track their suppliers and supplies, for example. More sophisticated uses of digital technology, such as actively tracking individual components transit, are few and far between, especially among operators.
Similarly, very few operators have clearly defined data and information requirements, despite vast scope for efficiency gains. Facilitating information exchange across all projects and suppliers with technology – for example, by adopting open standards to overcome data siloes – reduces risk and improves clarity.
George Demetriou, London Data Centre Business Area Leader at global multidisciplinary consultancy Arup, says the standardisation of digital tools for data centre design has improved project delivery.
“In the past, companies would design with different systems,” he explains. “Architects might use MicroStation; engineers might use Autodesk, for example. Nowadays we’re coordinating multidisciplinary, complex data centre projects much better.”
But the adoption of digital tools during construction phase is still limited, Demetriou adds. “The construction industry remains one of the least digitised.”
Even so, digitalisation and information management have improved the predictability of projects: this is the top benefit reported by users of both digital supply chain and information management practices. And predictability allows operators to manage their suppliers and deliveries more effectively.
Digital tools also enable offsite fabrication, adds Mercury Engineering’s Byrne. “Without the digital tool as the integrator between your offsite and onsite [activity], it's not going to work. You need that technology to allow for quality control and correctness of prefabrication to make sure it fits within the facility.” And they promise to support longer-term goals. Three out of four respondents agree that digital traceability will help operators meet their ESG and Scope 3 reporting requirements, while more than half (57%) predict that greater investment in AI forecasting and digital procurement will strengthen their supply chains.
These findings show that operators and contractors understand the value of digital innovation to construction and supply chain management. But more can be done to make this reality as standard.
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