Data centers: expensive to build, but worth every penny

In the world of commercial real estate, only a handful of product types can truly be classified as mission critical – healthcare facilities and data centers are two that immediately come to mind.  It’s not surprising that, because of their importance to our daily living, the sheer cost associated with developing either one of these product types is dramatically more expensive than an office or industrial building.  Data centers have their own cost nuances: They need to be located within close proximity to major fiber optic trunk lines with dual feeds from the power grid and require heavy power and security infrastructure.


The adage holds true for data centers: Location! Location! Location!  To decrease latency, data centers need to be located as close to the fiber optic trunk lines as possible.  Perhaps, more important, these facilities are best suited with dual, independent feeds from the power grid.  By virtue of these two qualities, data centers often are set within a sizable corporate concentration, putting a premium on land pricing.

What to expect: The Tier I markets will continue to see more construction and absorption but “edge cities” will also begin to thrive as providers seek to spread their megawatt (MW) footprint geographically.

Core and Shell

The average-powered base building (defined here as foundation, four walls and roof along with a transformer and common areas for security, loading dock, restrooms, corridors, etc…) of a data center facility typically ranges from $125 per square foot to upwards of $200 per square foot.  In general, this is somewhere between what it costs build industrial and office assets (depending on the design). 


Without a doubt, the biggest cost in making a data center “rack ready” is the infrastructure.  From the switchgear, UPS, redundant chillers and generators, an N+1 data center encompassing 3.5 MW of sellable IT capacity can be between $280 per square foot and $350 per square foot (assuming a 100,000-square-foot facility).  These costs can, of course, be much higher depending on the power, redundancy and availability requirements.

What to expect: Although Tier IV, 2N data centers catch headlines, they are reserved for those requiring the utmost security (financial institutions, healthcare users). More common now is the N+1, Tier III data center that provides all the necessary infrastructure but at a lesser price tag.


  • Facebook has invested more than $1.0 billion in their 1.25 million-square-foot Prineville Data Center.  Facebook is currently expanding this facility by 900,000 square feet of floor space plus 70,000 square feet of administrative space, representing a capital investment of hundreds of millions of dollars.
  • In 2007, Google announced plans to construct a data center in Council Bluffs.  By 2019, Google will have invested more than $2.5 billion into this 1.4 million-square-foot facility. 
  • In Orangetown, New York, JPMorgan Chase purchased 60 acres of land.  On this site, they’ll construct a $490 million data center spanning 150,000 square feet.
  • These three data centers pale in comparison to the granddaddy of them all – The Utah Data Center, also known as the Intelligence Community Comprehensive National Cybersecurity Initiative Data Center.  This $1.5 billion facility houses the NSA’s 100,000-square-foot mission critical Tier III data center that was designed by KlingStubbins and is LEED Silver certified.


The proliferation of data centers is only projected to increase as the world becomes more connected.  There is no doubt that efficiencies and component cost reductions will decrease the required space per kilowatt. However, the change in the way we consume content (videos, streaming TV and gaming, etc…) will push the limits of required bandwidth per person. Expect this to increase the burden on providers and outpace the efficiencies of storage technology.

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