Saudi Arabia is costliest Gulf market for data centre construction: Turner & Townsend report

By Zawya12 hours ago Updated

By Anoop Menon

Saudi Arabia is the most expensive of the three Gulf markets covered in Turner & Townsend's Global Data Centre Construction Cost Index 2026–27, with construction costs averaging $10.80 per watt, according to the UK-headquartered construction consultancy.

Building a typical 60-megawatt (MW) facility in the kingdom costs an estimated $10.80 per watt, ranking it 40th among the top 62 markets listed by the firm in its ‘Global Data Centre Construction Cost Index 2026–27’ report. Qatar follows at $9.80 per watt (53rd) and the UAE at $9.20 per watt (58th), the list showed.

However, averaging $9.93 per watt, all three Gulf markets remain substantially cheaper than the world's most expensive locations, making the region a more affordable location than Europe ($12.76), Asia ($12.10) and North America ($12.06).

Alan Coary, Director and Data Centre lead for the Middle East, at Turner & Townsend, said: “The Middle East stands to benefit from its relatively low cost of construction and energy, as well as strong government backing for AI infrastructure. Saudi Arabia’s HUMAIN initiative and the UAE’s continued investment in AI and hyperscale data centre development through G42 and Khazna are transforming the region’s computing capacity and positioning it as a globally competitive AI hub. This reflects a wider trend towards sovereign AI and government-backed digital infrastructure programmes.”

Tokyo leads the global ranking for a fourth straight year at $18.28 per watt, followed by Osaka at $17.15 and Zurich at $15.93. Seventeen European and 13 North American markets account for almost half of the overall ranking, reflecting persistently high costs in mature markets.

Global picture

Capital spending on data centres is already running at $800 billion a year and is expected to reach $1.8 trillion by 2050, the report said, warning that the rapid growth risks colliding with capacity and supply-chain limits.

The industry's challenges have intensified, from rising material and labour costs to difficulties securing the power, infrastructure, specialist equipment and planning consents required.

While costs are stabilising reflecting easing of inflation across the broader construction industry, they remain structurally higher and the risk is increasingly priced into contracting, the report noted.

About 52 percent of survey respondents experienced cost inflation of 6 to 15 percent in 2026, though the double-digit inflation anticipated by respondents to the 2025 survey has varied across markets.

North American and European markets saw the sharpest increases, with average construction costs per watt up 13 percent year on year.

For 2027, 28 percent of respondents expect inflation of 1 to 5 percent, while 57 percent expect it to stay below 15 percent.

AI premium

Facilities designed for Artificial Intelligence (AI) workloads carry a premium. In the U.S., they cost about 10 percent more than traditional data centres, driven by higher rack density, liquid-cooling requirements and accelerated schedules, according to the report. The most advanced AI-specific sites are recording $14 to $16 per watt, compared with a U.S. national average of $12.08.

The computing demands of AI technologies, requiring gigawatt-level power and liquid cooling for increased rack densities, are among several factors driving the development of larger data centres.

However, bigger is no longer a guarantee of lower per-watt costs, the report found, and can, in fact, bring a cost premium.

Factors limiting economies of scale include:

Market supply and demand imbalances: These can limit contractors' pricing efficiencies on larger projects and campuses.
Flexible designs: Designing facilities to accommodate future needs and technologies increases complexity and cost.
Schedule uncertainty: Greater uncertainty on larger projects drives higher risk premiums.
Planning and power constraints: Planning, power and design scope changes are the biggest schedule risks identified in the survey.

Based on the US experience, two takeaways for AI data centre markets in other regions are:

Contractor capacity: The extent of the cost premium for AI-ready facilities will depend partly on the number of large contractors available locally that are capable of delivering these projects at scale.

Project delivery models are changing: Approaches that once relied on project-by-project procurement, competitive tendering and transactional supplier relationships are increasingly being replaced by models designed to prioritise speed, certainty, flexibility and sustained capacity. Speed to market is now a core priority.

Power availability becomes critical

Access to electricity remains the defining obstacle of data centres. About 56 percent of respondents identified power as a major barrier to delivery, and 81 percent cited utility availability as one of their two most significant power-related constraints.

Utility connections take one to two years for 53 percent of respondents, while 32 percent reported waits of more than two years. As a result, 42 percent are using or exploring alternative power sources, up from 14 percent in the 2025 survey.

The latest report includes two charts examining the generation technologies being evaluated or deployed at data centre sites and the main power strategies adopted to support high-density AI workloads.

Grid connectivity remains the dominant power strategy for data centre developers, while gas turbines are the most widely considered alternative generation technology, followed by solar.

Traditional utility electricity remains the most widely adopted primary power strategy for supporting high-density AI workloads. A substantial number of respondents said they are redesigning their power infrastructure to accommodate growing electricity requirements.

Labour and supply chain

Some 81 percent of respondents said skilled labour in their region is constrained, with mechanical, electrical and plumbing (MEP) trades most sought after. As more projects incorporate on-site power generation, demand for electrical specialists is growing further.

AI workloads are accelerating the shift towards higher-density, liquid-cooled environments. 52 percent of those surveyed expect liquid cooling to feature in more than half of the data centres they work on over the next 12 months, with cooling distribution units and hybrid air/liquid systems expected to be the most widely used solutions.

This transition brings an upfront cost and delivery challenge as advanced systems require specialist design and installation. There are clear risks emerging as 64 percent of respondents describe their local supply chain as moderately, highly or severely constrained.

Outlook

The global data centre sector has evolved from a niche sector within commercial real estate into a major driver of global construction activity – and the global economy (representing an estimated two to seven percent of GDP, country-dependent).

About 74 percent of respondents are confident the industry can withstand an economic downturn, and only 20 percent consider it vulnerable or highly vulnerable, down from 26 percent a year earlier.

Some 39 percent worked mainly on AI-ready facilities over the past year, while 53 percent expect AI-dominant workloads in the year ahead.

Governments are increasingly active participants rather than just regulators, the report said, with multibillion-dollar sovereign investment programs and incentives to speed delivery. Data sovereignty is set to be among the strongest influences on future development, as countries seek greater control over the infrastructure supporting AI, cloud computing and critical digital services.

Increasing attention is also being paid to the longer-term usability of data centres, raising questions about asset resilience and adaptability.

64 percent of survey respondents said sustainability and environmental, social and governance (ESG) requirements are moderately, considerably or significantly influencing the design of new data centres.

Significant design changes during project delivery in response to local feedback and expert advice are now commonplace. This trend is likely to continue as technological developments require facilities to be designed with future requirements in mind.

Although the scale of data centre developments can raise concerns, their fundamental structures are flexible, reusable and built for the long term.

Technology within data centres can be removed and replaced as it improves, allowing infrastructure to become more efficient without incurring the equivalent carbon cost of constructing a new building each time.

(Writing by Anoop Menon; Editing by SA Kader)

(anoop.menon@lseg.com)

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