In this year's expanded data centre cost index – doubled in coverage to 32 markets – it is Zurich, a new entrant, that claims the position as the most expensive market to build a data centre. The 27 percent premium when compared to London is the result of both high labour costs and import duties on equipment as a non-member of the European Union.
Chart 1: Data centre cost index
Chart 2: Indicative US$/W for technical fit out (including equipment)
In the USA, there is no significant movement in the index when compared to London, with foreign exchange rates continuing to favour North America.
We show that the world’s largest data centre market of North Virginia has average construction costs of US$8.1/W.
This is considerably better value than both the Silicon Valley market (US$9.2/W) and the financial services hub of New Jersey (topping the scales at US$9.5/W). Dallas and Phoenix continue with their battle to attract the attention of hyperscale providers, with favourable average build costs of US$7.4/W and US$7.1/W respectively.
Toronto is a new addition for North America (US$6.8/W), and its zero tax applied to equipment helps explain its comparatively low cost to the Latin American markets – which each have high costs for freight and large percentages for local tax and import duties. This year, Latin America features ABC, with Argentina (US$6.5/W), Brazil (US$6.7/W), and Chile (US$6.6/W) each announcing or attracting hyperscale development/expansion announcements during the year.
We still see London as the more expensive (US$8.6/W) location in the established European data centre market of Frankfurt, London, Amsterdam and Paris (FLAP), with not much movement in our results a year on. This is despite the Amsterdam market considered to have the most large-scale construction. Perhaps the impact of this will be felt during the calendar year of 2019? This year’s index does show an 8 percent increase in data centre construction costs in Dublin (US$7.5/W), narrowing the gap with the established markets. And we expect prices to rise by a similar amount in the year ahead.
Copenhagen could not be ignored this year, it has clearly established itself as the hyperscale market of choice in the Nordics. But with high employment levels and a small construction industry in Denmark, the total capital costs to build a data centre there are no better than London, given the amount of construction expertise being imported from the UK and Ireland.
Madrid and Warsaw were added this year due to known colocation activity. And expanding further to include the wider EMEA region, the UAE features alongside both Johannesburg and Nairobi as new entrants. The import duties required for each of these latter locations weigh heavily on the resultant US$/W for construction, despite the low costs of labour. Warsaw featured as the cheapest market in EMEA at US$5.9/W – perhaps surprisingly cheaper than either Nairobi at US$6.4/W or Johannesburg at US$6.1/W, again due to freight and import duties.
In Asia, we see Tokyo clearly establish itself as the most expensive location at US$9.3/W – now 10 percent more than London. As a “closed market” in busy conditions, contractors' increased margins are to blame. Sydney remains a close second in the region, and the only other location from APAC – although marginally – more expensive than London, with prices for both materials and skilled labour higher than its APAC neighbours.
We have added Jakarta as the region's emerging market for cloud service adoption, and the results show that it is around 10 percent cheaper than neighbouring Singapore (US$6.6/W). The cities of Beijing and Shanghai have been added in recognition of the rapidly expanding Chinese data centre market, with both locations about 20 percent cheaper than their sister and established data centre market of Hong Kong (US$7.1/W).
India remains as the cheapest market globally, consistent with DCCI-2017, though the addition of Chennai at a construction cost of US$3.8/W takes the crown away from Mumbai as the cheapest city featured, with an index of just 0.41 when compared to London.
Chart 3: Shell and core parametric costs
This content is part of the Data centre cost index 2018