Data Centers Overtake Offices In US Construction-Spending Shift

An anonymous reader quotes a report from Bloomberg: Spending on data center projects in the U.S. has exploded, surpassing offices for the first time at the end of last year. It's a trend Matt Kunz saw early on when Meta built a computing hub outside Columbus, Ohio. Other tech companies soon swarmed into the area, drawn by its stable economy, university talent pipeline and ample power, water and land, said Kunz, vice president and general manager at Turner Construction Co., the firm that led Meta's build-out. Since Meta broke ground in 2017, it's expanded its data center campus, and Amazon.com Inc., Alphabet Inc.'s Google and Microsoft Corp. made plans to join it nearby.

"When one shows up, almost all the other ones tend to follow," Kunz said. For Turner, a construction giant responsible for supertall office skyscrapers, sports stadiums and cultural venues around the globe, data centers are commanding more of its bandwidth. The company completed $9.4 billion of the projects last year, more than five times its 2020 total. Last month, Turner announced it was chosen as one of the contractors on a $10 billion data center for Meta in Indiana. Tech companies' needs for AI processing facilities have made data centers the latest darling of the real estate industry. The properties are figuring heavily into portfolios of major investors such as Blackstone, Brookfield Asset Management and KKR, on a bet that long-term demand for computing power will continue to grow. At the same time, office development has slowed as cities across the U.S. contend with vacancies that have piled up since the Covid lockdowns.

Construction spending for data centers has climbed steadily in recent years, while outlays for general office projects headed downward, U.S. Census data show. The two crossed paths in December, with roughly $3.57 billion spent on data centers that month, compared with $3.49 billion for offices, according to preliminary estimates. The shift is likely to continue and "may perpetuate itself even further as AI is utilized for automating day-to-day jobs," said Andy Cvengros, co-lead of U.S. data center markets for the brokerage Jones Lang LaSalle Inc. "It's going to directly impact the amount of office space people need." According to Christopher McFadden, senior vice president at Turner, more than a third of the company's backlog is now tied to data centers.

"We're going to be building these at this scale for years to come," McFadden said. "There's a lot of wind in the sail."

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