Constructing in Atlanta – Top Tips for Data Center Developers

22nd May 2024

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It’s no secret that Atlanta is the new hotspot for data center development. But the region is not without its challenges. With so many flocking to the area, we asked three of our experts for their tips on ensuring project success in Atlanta. Here’s what they had to say.

With some predicting a seven-fold increase in demand for new data centers over the next three years it’s not just traditional locations that will benefit. One region that is already leveraging the opportunity is Atlanta, Georgia. With its central location, robust connectivity, favorable business climate and attractive incentivization, Atlanta has been promoted to a primary market; top of the list for hyperscalers and enterprise users looking for an alternative to power-strapped Northern Virginia.

As the sixth fastest growing data center market in the US Atlanta’s trajectory in recent years has been staggering. There are at least 18 data center campuses either in development or preparing for sizable expansions across the region. While other tier 1 regions have been struggling to match utility supply with demand, Atlanta has seen rapid absorption of data center space, leading to a 60% increase in planned capacity in recent years.

 

Key considerations
With so many turning their attention to Atlanta, it’s vital to be prepared. Some are entering the market with little forethought, leading to costly delays. Those who are succeeding are those that are thinking differently – and planning ahead. Top of every developer’s agenda, and every front-page, is of course power. But that’s not the only challenge for those entering this emerging market. Aside from ensuring power agreements are in place early, what else should data center developers be considering to ensuring success in Atlanta? We’ve identified three key focus areas for anyone looking to expand in the region.

 

 

Martin Brown for Soben

 Martin Brown, Lead Project Manager, Soben Americas: “Prepare your supply chain early”

With increased demand comes unprecedented pressure on an already stretched talent pool. The availability of skilled labor is one of the biggest challenges facing data center development in the region. It’s vital to work closely with your supply chain, at all levels, to get everyone on board early.

One of our clients is a global hyperscale owner operator that spent two whole years preparing for market entry before moving into the region. Prioritizing and maximizing available services from minority and women-owned businesses (MBE/WBE), they skillfully lined up their supply chain, diversified their workforce, and benefited from favorable tax incentives, all in one push. Their effort establishing strategic partnership agreements with equipment manufacturers, general contractors, and subcontractors paid off big time, especially having pre-established relationships with the Electrical Contractors. By the time this Owner Operator entered the market, everything was in line and ready to go.

Before entering the Atlanta market, you will need a carefully considered and thorough entry plan. Focus on warming the supply chain early by building relationships with the GC’s, MEP trade providers, and plan to procure critical Electrical and HVAC equipment as OFCI. The days of critical equipment being CFCI (Contractor Furnished Contractor Installed) are a thing of the past and will continue to be for the foreseeable future. This means that owner operators will need to go to the equipment manufacturers and suppliers directly and build strong relationships with them. Without strong relationships, priority can be compromised by the significant buying power of competitors, which in turn can have an impact on your scheduled project delivery dates.

With so many large projects being developed concurrently in the market, there’s an acute shortage of availability from the highly experienced and preferred electrical contractors. With electrical work accounting for upwards of 60% of the data center construction scope, the electrical contractor can make or break a construction schedule, and this fact alone increases the demand of the preferred electrical contractors. To combat this, some GCs are partnering with electrical contractors prior to the preconstruction phase of the project, so data center owner operators are hiring the GC and EC as a package deal at a premium cost to ensure the services of the preferred EC.

It’s important to think about how you’re going to work with the local market talent, and how you will attract the right people to deliver your project. We’re seeing some DC developers offer significant incentives to attract staff – astronomical per diems, significant housing stipends, generous travel allowances, and free meals – perks galore! In a new market which isn’t accustomed to building gigawatts of data center capacity, you’ve got to think differently to get your project completed.

In a limited labor market, it’s not just about building relationships with local construction service providers nor is incentivizing people to move from other states the panacea of solutions. It’s an arms race for talent across the wider region. In Indiana, just several hundred miles north of Georgia, between AWS and Google alone, the market is expecting $15B of development in the next 24 months. With everyone fishing in the same talent pool, those who win will be those who successfully solve how to attract, train, and ultimately retain their talent. Companies that succeed will be those that successfully recruit talent from other mission critical sectors, bring talent over from dwindling industries like Oil & Gas, and retrain personnel from different labor pools. The real point of pain will be in the electrical trades, where significant training is required. Programs like the local union apprenticeship programs are helping to provide more capacity for the electrical trades, and the DCD Academy from Data Centre Dynamics is leading the way to help provide additional project management.

 

Robbie Druce Soben Robbie Druce, Associate Director, Soben Americas: “Calculate the cost to enter”

With mission critical labor shortages come escalating costs. But that’s not the only area where budgets are rising at an alarming rate. Changes in how equipment is purchased and stored are also driving up costs in Atlanta. Typically, mechanical equipment, electrical equipment, distribution gear and backup systems were CFCI (contractor furnished contractor installed) with strategically planned delivery dates that aligned with the project schedule. Now, with lead times on mechanical and electrical equipment sometimes exceeding 52 weeks, data center providers have moved to an OFCI (owner furnished contractor installed) model, purchasing equipment program-wide and mitigating delays. The downside is that buying equipment for a program or entire site, instead of per building, can drastically increase initial capital expenditures.

With owners purchasing equipment program-wide, they must now find off-site storage. Costs are staggering due to leasing temperature-controlled warehouse space, hiring contractors to perform routine maintenance on the equipment, and carefully following manufacturers’ storage instructions.

Another thing to navigate is warranty periods. Previously the warranty would begin when a piece of equipment was delivered, and that warranty would fall back on the installing contractor and the manufacturer. There would be a gap between delivery and energization, but that gap would fall back on, and be covered by, the subcontractor. Now, with owners buying the equipment and storing it, they have to figure out how to preserve the manufacturer’s warranty and follow their instructions for storage, staging and relocation so that the warranty period can begin when the equipment is energized. If not properly documented and completed perfectly, costs for repairing equipment will fall back on the owner and not be covered by the warranty.

 

Robert Kim 2 1 1

Rob Kim, Director, Soben Americas: “Don’t underestimate the power of public opinion”

If labor shortages and rising costs weren’t enough, developers in Atlanta must also contend with increasing public interest, and pushback, around all this data center activity. We’re seeing public perception, and awareness, of data centers changing, with local communities becoming more vocal about their concerns and potentially blocking progress.

Recent political discourse around whether to pause tax breaks for new data center development are a warning sign of shifting public opinion – coming at a time when demand for space is at its highest.

Recent discussions around the future of tax incentives in Georgia for new data center developments have been attributed to ongoing power shortage fears. But another factor in this political shift is the realization that while data centers bring a short-term surge from construction activity, the long-term benefits to the communities we operate in is getting challenged. That, coupled with increasing concern from communities, is causing legislators to rethink their position.

As we build closer to residential areas, public perception is going to become more and more challenging. We’ve seen public hearings with people vocal about perceived safety hazards from substations, noise, and traffic. Developers moving into the region shouldn’t underestimate the potential for this community pushback to stall progress. Be prepared to work hard to win hearts and minds and think about ways to provide local economic benefit – engage communities early, listen to their concerns and engage in meaningful public outreach – with local residents, state legislators and the wider stakeholder community.

Developers in Atlanta must learn from other regions who are successfully reversing the industry’s image problem. With innovative district heating schemes, job-creation programs, and community engagement initiatives it is possible to demonstrate how, instead of a drain on local resources, continued data center development can have a sustainable and invigorating impact on the local economy.

 

Plan ahead and think differently for success
Whilst recent headlines suggest that the state of Georgia is starting to question the economic benefits of this surge in development, for now, the region still offers multiple strategic advantages to developers looking outside of traditional hotspots. And the trend shows no sign of slowing. Forecasters predict Atlanta will maintain a CAGR (Compound Annual Growth Rate) of 21.83%, eventually reaching over 1300 MW by the end of the decade.

While developers attracted to the region, and the wider northern corridor from Atlanta to Indiana, shouldn’t underestimate the complexity of entering this market, these challenges don’t have to be a barrier to progress. Instead, we see them as an opportunity to innovate – rethinking procurement approaches, investing in talent development, and exploring new collaboration models to drive our industry forward.

 

About Soben

Soben offers something different: world-class construction consultancy, paired with hands-on commercial experience. We increase certainty in our clients’ investments through cost, schedule, risk, and project management. With a track record of successfully delivering major construction projects, we pride ourselves on going the extra mile. And we always deliver on our promises.

We are working with the global leaders in hyperscale and colocation data center development on some of the world’s largest, most complex schemes.

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