Key Takeaways
- • Data center construction costs surged 21% per megawatt between Q4 2024 and August 2026, according to Cushman & Wakefield's latest Development Cost Guide, marking a significant acceleration in project economics.
- • Per-square-foot construction costs jumped from $630 to $960 between 2025 and 2026, while longer-term analysis shows global per-megawatt costs rising from $7.7 million (2020) to $10.7 million (2025), representing 7% compound annual growth over five years.
- • Cost escalation drivers include critical equipment lead times, rising skilled labor wages, material cost inflation, and supply chain constraints across North American markets spanning primary, secondary, tertiary, and frontier regions.
- • Industry professionals expect continued cost pressure in 2026, with 60% forecasting additional increases of 5–15%, while 21% anticipate inflation exceeding 15%, directly impacting site selection and project feasibility across 480+ data centers under construction or active planning.
- • Power, land access, and skilled labor availability are emerging as primary determinants of geographic growth feasibility, fundamentally reshaping development economics and investment returns across data center real estate markets.
Summary
Cushman & Wakefield's 2026 Data Center Development Cost Guide documents a pronounced acceleration in construction costs across North American data center markets. The 21% per-megawatt increase since the firm's Q4 2024 report reflects structural pressures that extend beyond typical inflationary cycles. Per-square-foot metrics tell a parallel story: construction costs climbed from $630 to $960 between 2025 and 2026, an increase of approximately 52% over a single year. Longer-term data center construction costs have risen from $7.7 million per megawatt in 2020 to $10.7 million per megawatt in 2025, representing 39% cumulative growth and a 7% compound annual growth rate over the five-year period.
The primary cost drivers identified across the industry are critical equipment lead times, escalating wages for skilled labor, and persistent material cost inflation exacerbated by supply chain disruptions. These factors apply uniformly across diverse markets—Cushman & Wakefield's analysis covers primary, secondary, tertiary, and frontier markets throughout the United States and Canada, indicating that cost pressures are broadly distributed rather than concentrated in specific regions. The guide's comprehensive scope addresses land acquisition, labor market dynamics, construction costs, and capital expenditure trends, providing institutional investors and developers with granular market-level intelligence.
Industry sentiment on forward-cost trajectories remains cautious. According to industry surveys, 60% of professionals expect construction costs to rise an additional 5–15% during 2026, while 21% anticipate inflation exceeding 15%. This outlook reflects uncertainty about sustained supply chain recovery and labor market normalization. John McWilliams, head of data center insights at Cushman & Wakefield, characterized the sector as "entering a new phase where access to power, land, and skilled labor are increasingly determining where growth can occur." This observation underscores a fundamental shift in development economics: traditional cost variables are being superseded by resource constraints that directly constrain project feasibility.
The broader development pipeline reflects this tension between capital deployment and logistical constraints. Over 480 data centers are under construction or in active planning across 40+ U.S. states, yet resource scarcity is reshaping site selection criteria and project returns. Industry modeling assumes construction costs ranging from $10 million to $12 million per megawatt, implying substantial capital requirements and heightened sensitivity to cost overruns. Data center REITs delivered 39–45% returns over the prior 12-month period, driven by hyperscaler demand and AI infrastructure buildout, but sustained cost inflation poses a material risk to forward return profiles and project economics across the sector.
The primary cost drivers identified across the industry are critical equipment lead times, escalating wages for skilled labor, and persistent material cost inflation exacerbated by supply chain disruptions. These factors apply uniformly across diverse markets—Cushman & Wakefield's analysis covers primary, secondary, tertiary, and frontier markets throughout the United States and Canada, indicating that cost pressures are broadly distributed rather than concentrated in specific regions. The guide's comprehensive scope addresses land acquisition, labor market dynamics, construction costs, and capital expenditure trends, providing institutional investors and developers with granular market-level intelligence.
Industry sentiment on forward-cost trajectories remains cautious. According to industry surveys, 60% of professionals expect construction costs to rise an additional 5–15% during 2026, while 21% anticipate inflation exceeding 15%. This outlook reflects uncertainty about sustained supply chain recovery and labor market normalization. John McWilliams, head of data center insights at Cushman & Wakefield, characterized the sector as "entering a new phase where access to power, land, and skilled labor are increasingly determining where growth can occur." This observation underscores a fundamental shift in development economics: traditional cost variables are being superseded by resource constraints that directly constrain project feasibility.
The broader development pipeline reflects this tension between capital deployment and logistical constraints. Over 480 data centers are under construction or in active planning across 40+ U.S. states, yet resource scarcity is reshaping site selection criteria and project returns. Industry modeling assumes construction costs ranging from $10 million to $12 million per megawatt, implying substantial capital requirements and heightened sensitivity to cost overruns. Data center REITs delivered 39–45% returns over the prior 12-month period, driven by hyperscaler demand and AI infrastructure buildout, but sustained cost inflation poses a material risk to forward return profiles and project economics across the sector.
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