Africa is one of the most competitive markets in which to build data centres, and Lagos, Cape Town, Johannesburg and Nairobi have all seen increased activity in recent years.

Lower labour costs, access to land and maturing local supply chains are key drivers of this, professional services firm Turner & Townsend’s ‘Data Centre Construction Index’ (DCCI) report shows.

Lagos, at $10.87/W; Cape Town, at $10.70/W; Johannesburg, at $10.62/W; and Nairobi, at $10.03/W are all ranked in the lower third of the Index, reaffirming Africa’s position as one of the most competitive cost environments for data centre construction in the world, says Turner & Townsend data centre lead for Africa Wendy Cerutti.

In particular, Lagos has continued to drop down the cost rankings globally, having entered at seventh in 2024 before falling to twenty-seventh last year and forty-second this year.

Across Africa as a whole, relatively affordable labour costs and ready access to land helps to keep costs down, while supply chains are maturing as the local specialist talent pool expands, she says.

“Demand is also building with growing use of cloud services, new subsea cables and rules that require data to be stored in-country making a strong case for new capacity. It means there is a real chance to enter a growing market at a lower cost for data centre operators, investors and developers alike.”

Global data centre construction costs continued to rise this year, as surging demand for AI computing power and large-scale data centre projects outpaced the supply of powered land and skilled labour to deliver them.

Further, the research shows that, despite some stabilisation in cost inflation this year, structurally higher construction costs and risk are increasingly priced into contracting, while a deepening skills shortage is putting pressure on labour costs.

The rising costs of data centre construction are increasingly driven by the growing scale of the builds, particularly for AI facilities, which require alternative delivery approaches, technical specialists and new risk-balanced models to overcome strained capacity and accelerate schedules.

The report shows that 52% of respondents anticipate a majority (more than 50%) of their 2027 projects will be data centres to support AI workloads.

Further, 52% of survey respondents experienced cost increases this year above 6%, with about 20% reporting inflation above 15%.

In 2027, 28% of respondents expect inflation to be between 1% to 5%, indicating a continued softening of cost pressure, while 57% of respondents expect inflation to be below 15%.

The DCCI also found that 81% of survey respondents report that skilled labour in their region is either moderately or highly constrained, and only 52% believe contractor capacity is manageable for now.

Additionally, 56% of survey respondents identified power as a major obstacle to successful delivery, with 52% reporting that utility connections typically take between one and two years, and 32% reporting timeframes over two years, the report shows.

Globally, the top five highest cost locations in the index were Tokyo, at $18.28/W; Osaka, at $17.15/W; Zurich, at $15.93/W; Silicon Valley, at $15.01/W; and Copenhagen, at $14.41/W.

While Japan holds the top spot in the index, the fact that 17 European and 13 North American markets make up almost half of the top table reflects these regions’ continued dominance of the industry.

About half of all global data centres are in North America, and about one-quarter are in Europe, Turner & Townsend says.

By contrast, the lowest-cost locations in the index were Shanghai, at $5.79/W; Mumbai, at $6.83/W; Ho Chi Minh City, at $8.32/W; Bogota, at $9.13/W; and the United Arab Emirates, at $9.20/W. These emerging data centre markets provide cheaper labour and greater access to it.

“Over the decade since we first published our construction cost index we have seen the data centre industry completely transformed, with capital expenditure on data centres now $800-billion per year, and expected to reach $1.8-trillion by 2050,” says Turner & Townsend DCCI lead Paul Barry.

AI’s exponential demand for computing power, combined with cloud adoption and the growing importance of data and sovereign capacity, is driving data centre investment and development at unprecedented scale, reshaping the construction landscape, he says.

“However, rising material and labour costs continue to create challenges globally, while access to power, specialist equipment and skills continue to create bottlenecks.

“Data centres are also subject to increasing scrutiny, with political and community consent essential to delivery. AI-driven demand for gigawatt-level power and liquid cooling for increased rack densities is driving the growth of larger-scale data centres, but the shortage of skilled labour and the greater risks involved in the delivery of larger more complex projects is driving a cost premium,” says Barry.