The colocation data center market is growing fast, driven by AI and power-hungry workloads. By 2030, the global market is expected to double, reaching $204.4 billion, with North America leading the way. But this rapid growth comes with challenges:
Key trends:
The colocation industry is shifting from focusing on space to prioritizing power delivery. Developers must secure skilled labor early, streamline workflows, and adopt advanced tools to meet growing demand.
Colocation Data Center Market Growth and Construction Challenges 2026
The colocation industry is expanding at a fast pace. Globally, the market is expected to grow at a 14% compound annual growth rate (CAGR) through 2030, with the Americas leading the charge at an impressive 17% CAGR - the fastest growth rate worldwide.
This growth is accompanied by rising construction costs. By 2026, the average cost of building data centers is projected to hit $11.3 million per megawatt, marking a 6% increase from 2025. Additionally, AI-optimized facilities, which require advanced cooling and power systems, will push costs up to $25 million per megawatt.
The demand for colocation space has far outpaced supply, creating a tight market. Vacancy rates in primary markets dropped to just 1.6% in the first half of 2025. Developers are now racing to secure construction resources years in advance, leading to fierce competition for skilled labor and materials even before projects break ground.
These global trends are clearly visible in North America, where specific regional factors are shaping the future of colocation development.
North America leads the global colocation construction pipeline, with 35 GW of capacity currently under construction and an astounding 92% pre-lease rate. By the end of 2026, the region is expected to host 1,188 colocation data center sites, with that number projected to rise to 1,540 by 2035. However, this growth is shifting away from traditional hubs to emerging areas.
Frontier markets now account for 64% of the 35 GW under construction in North America. Regions like West Texas, Ohio, Wisconsin, Indiana, and Tennessee are absorbing much of this growth as established markets, such as Northern Virginia and Silicon Valley, face power limitations.
For instance, in March 2026, Microsoft secured approval to build 15 new data centers at the former Foxconn site in Mount Pleasant, Wisconsin, with a taxable value projected to exceed $13 billion. Around the same time, Meta began constructing a 1 GW data center campus in Lebanon, Indiana, representing a $10 billion investment and creating 4,000 construction jobs at its peak.
This geographic shift is largely driven by power availability. As Everett Thompson, CEO of Wired Real Estate Group, puts it:
"Energy resources, not immediate proximity to an urban core, are now the primary site-selection driver".
This new focus on energy is pushing construction teams to adapt to less familiar locations, navigate local labor markets, and comply with varying regulations - all while meeting tight project deadlines.
Colocation developers are grappling with challenges that are slowing project timelines and driving up costs, even as demand for data centers hits record highs. Scaling colocation projects efficiently requires tackling issues like power constraints, rising expenses, and extended timelines - all reshaping how these facilities are built.
Power availability has become the biggest hurdle in colocation development. By early 2026, there were over 10,000 projects - representing 1,400 GW of generation and storage capacity - stuck in grid interconnection queues. What used to take under two years for grid connection now stretches to four to five years.
Sanchit Vir Gogia, Chief Analyst at Greyhound Research, highlights the issue:
"Construction slowed because physical infrastructure realities have overtaken financial capital as the dominant gating factor".
In many key markets, grid power capacity is essentially maxed out through 2030. This scarcity is forcing developers to explore alternative power, cooling, and battery solutions. For example, in December 2025, GridFree AI launched its South Dallas One site in Texas. This facility, designed to deliver 1.5 GW of capacity within 24 months, operates entirely off-grid, bypassing the typical four-year utility interconnection timeline. Other developers are turning to behind-the-meter options like on-site natural gas generation, solar, wind, and battery storage.
Adding to the complexity, supply chain disruptions have pushed lead times for critical components - like high-voltage transformers and switchgear - to 36–48 weeks. The surge in AI-driven demand has also created shortages in memory and storage. Local permitting and zoning have become new pain points, as communities scrutinize the water use, noise, and grid impact of massive data center campuses. These infrastructure bottlenecks are inflating costs and making project schedules harder to manage.
Construction costs are climbing rapidly. Between 2020 and 2025, global data center construction costs grew at a 7% annual rate. Looking ahead, 60% of industry professionals expect costs to rise another 5% to 15% in 2026.
For facilities optimized for AI workloads, expenses are even higher. These projects often require advanced cooling and power systems, driving costs to $25 million per megawatt. Power infrastructure alone - like geothermal systems or high-pressure gas lines - can cost $200 million to $300 million before a single tenant occupies the space.
Labor shortages are a significant factor. Peak crew sizes for major campuses have ballooned from 750 to as many as 4,000–5,000 workers. For instance, DataBank's Red Oak Campus in Dallas, Texas, is scaling its workforce to 4,000–5,000 workers to deliver eight facilities spanning 3.4 million square feet. Tony Qorri, Vice President of Construction at DataBank, explains:
"The industry simply doesn't have enough qualified workers to meet demand".
To combat these rising costs, developers are turning to strategies like modular construction and phased deployments. Multi-year stocking programs are helping lock in material prices, while modular and prefabricated construction methods are reducing on-site labor needs. Breaking projects into phases with return-on-investment checks at each stage is another way developers are managing financial pressures. For a deeper dive into these strategies, check out our data center construction guide.
Project timelines are stretching far beyond 12 months, largely due to delays in power interconnections, permitting issues, and supply chain challenges. Despite record demand, data center capacity under construction in North America dropped by 5.5% at the end of 2025 compared to the prior year.
The financial consequences of delays are steep. For a 60 MW data center, every month of delay can cost $14.2 million, including $10.8 million in lost revenue and $1.2 million in SLA penalties. A six-month delay can slash a project’s Internal Rate of Return (IRR) from 17.1% to 8.8%.
Dr. Atif Ansar, Executive Chairman at Foresight, points out:
"Projects do not slip because people are incompetent. They slip because the system is incapable of detecting slippage early enough to act".
To address these delays, developers are integrating processes like land acquisition, permitting, utility engagement, and power procurement into a single streamlined workflow instead of handling them sequentially. AI-driven scheduling tools are also being used to analyze complex interdependencies and flag potential delays months in advance. Additionally, developers are standardizing assemblies and employing connected digital workflows to make Building Information Modeling (BIM) models fabrication-ready earlier, cutting down on manual errors and coordination issues. These measures are essential to keeping projects on track and addressing workforce challenges effectively.
The construction industry faces persistent challenges, and securing a skilled workforce has become essential to meeting the growing demands of data center projects. With rising construction costs and frequent schedule delays, having the right talent in place is now a top priority. The shortage of skilled labor is particularly pressing in colocation data center construction. As projects grow in size and schedules tighten, the gap between available expertise and project requirements directly impacts timelines and quality.
Project Managers with Data Center Expertise
These professionals oversee design, construction, and commissioning processes, earning between $120,000 and $180,000 annually. Their specialized experience helps them predict and address issues like power sequencing challenges, ensuring smoother project execution.
MEP Engineers
Mechanical, electrical, and plumbing (MEP) engineers design and manage 24/7 systems critical to data center operations. With salaries ranging from $95,000 to $140,000, they tackle advanced power distribution and infrastructure challenges.
Commissioning Agents
Commissioning agents play a vital role in verifying system performance before launch. They typically earn $85,000 to $125,000 and help refine designs to meet operational demands.
AI Infrastructure Specialists
As AI workloads demand higher power densities and advanced cooling solutions, AI infrastructure specialists are in high demand. Their salaries range from $140,000 to $200,000.
Cost Estimators and Schedulers
These professionals ensure financial control and timeline management, helping projects stay on budget and on schedule despite rising costs.
The rapid growth of the data center sector is stretching workforce capacity to its limits. Filling senior roles, such as MEP engineers and commissioning agents, can take months, creating risks for project schedules. According to The Birmingham Group:
"a limited portion of applicants meet the specialized qualifications required for modern data center roles, highlighting the urgent need for skilled construction talent".
The challenge isn’t just about numbers - it’s about finding workers with both traditional trade skills and advanced technical knowledge. Adding to this difficulty, many experienced professionals are nearing retirement, reducing the pool of leadership talent and slowing the transfer of critical expertise to the next generation.
Competition for skilled workers is heating up across the country. While hubs like Northern Virginia remain crucial, secondary markets such as Columbus, OH, Reno, NV, Phoenix, AZ, and Dallas–Fort Worth are also feeling the pressure. Employers are responding with performance incentives, increased education budgets, and certification programs. For instance, facilities engineers now earn between $75,000 and $115,000 as companies focus on retention. Addressing these challenges demands a strategic approach to workforce planning.
Workforce planning is as critical as procurement, sequencing, and risk management in ensuring project success. Companies are now focusing on filling essential roles well before construction begins, enabling early coordination and reducing the risk of delays. For example, involving commissioning agents during the design phase can influence system layouts and testing plans, improving outcomes.
Prioritizing candidates with mission-critical experience is key. Professionals with backgrounds in data centers, energy facilities, or advanced industrial projects bring the "pattern recognition" needed to handle complex challenges. A project manager with experience in hyperscale builds is far better equipped to foresee and mitigate critical issues compared to someone with only general construction experience.
Blended staffing models are becoming more popular, combining permanent leadership teams with project-specific specialists during peak phases. Meanwhile, major players like Amazon, Microsoft, and Google are collaborating with community colleges and trade organizations to create fast-track certification programs and upskilling initiatives. These efforts aim to fill immediate talent gaps while also fostering a pipeline for long-term workforce development.
With the growing labor shortages in the colocation data center construction sector, iRecruit.co steps in with recruitment solutions tailored to these unique workforce challenges. The demand is immense - only 5 GW of the 16 GW planned for 2026 is currently under construction, and up to 50% of the pipeline could face delays due to skilled labor shortages. iRecruit.co tackles this issue with a focused recruitment strategy, offering flexible pricing, a strong pool of pre-screened candidates, and hiring guarantees that support large-scale projects.
iRecruit.co operates on a success-based pricing model, meaning clients only pay a contingency fee - 20–25% of a hired candidate's first-year base salary - after a successful placement. There are no upfront costs. For single-role hires, the fee is set at 25%, while organizations seeking broader recruitment solutions can choose monthly retainer plans ranging from $5,000 to $15,000. These plans provide unlimited candidate sourcing and priority access. For instance, a $10,000 monthly plan covering roles like construction managers and electricians can lower per-hire costs by up to 40% compared to contingency fees - a critical saving for large-scale projects like the $15 billion Stargate data center, which requires over 500 skilled workers.
For companies managing multiple open roles, iRecruit.co offers a plan priced at $3,500 per month per active role, paired with a reduced 20% success fee. This approach makes it more affordable to assemble entire project teams simultaneously. Combined with thorough candidate screening, this model ensures quick and cost-effective team building.
To address the skill gaps in the industry, iRecruit.co maintains a database of over 5,000 pre-screened candidates, all vetted for mission-critical construction roles. This pool includes professionals with specialized expertise, such as electricians experienced in hyperscale projects, HVAC specialists certified for Tier III/IV data centers, and project superintendents with backgrounds in major builds like Virginia's 900MW campuses. All candidates have at least five years of experience in colocation projects and are available within 30 days.
The screening process involves three stages: a detailed resume review, technical interviews aligned with Uptime Institute Tier standards, and thorough reference checks. This rigorous approach results in a 95% placement success rate. For example, in a 2025 Louisiana data center project valued at $10 billion, iRecruit.co successfully placed 150 electricians and structural engineers pre-qualified for high-voltage infrastructure. This effort cut hiring time by 50%, ensuring the on-time completion of Phase 1.
To provide additional security, iRecruit.co offers a 90-day replacement guarantee for permanent hires. If a candidate leaves or fails to perform within the first 90 days, they are replaced at no extra cost, including re-recruitment and onboarding. This guarantee proved invaluable during a Phoenix colocation expansion, where 12 underperforming superintendents were replaced within 60 days. The move saved the client $250,000 in downtime costs and kept the project on track amidst tight deadlines tied to the 2026 pipeline.
With a 98% retention rate beyond the 90-day period, this guarantee highlights the strength of iRecruit.co's screening process. As construction costs rise - projected to reach $11.3 million per MW by 2026 with a 7% CAGR - this level of hiring security becomes increasingly essential.
The colocation data center market is expanding at an impressive 14.4% annually and is projected to reach $204.4 billion by 2030. However, this rapid growth is accompanied by a persistent labor shortage, which directly impacts the ability to maintain consistent output per labor hour. With 75% of the 5,242 MW currently under development in North America already pre-leased, ensuring projects are delivered on time has never been more critical. By 2026, the key challenge won’t be securing space or power - it’ll be finding the skilled workers necessary to bring these projects to life.
To address this, workforce planning needs to move beyond simply increasing headcount. Instead, the focus should be on boosting productivity through strategies like connected digital workflows, prefabrication, and standardized assemblies. Tony Qorri, VP of Construction at DataBank, emphasized this point:
"The operators who secure skilled labor now, through early contractor commitments and creative workforce strategies, will have significant advantages over those waiting until projects break ground".
This shift requires adopting tools like BIM and fabrication systems earlier in the process, which helps reduce reliance on field crews for troubleshooting. Treating construction as a streamlined production system rather than a series of one-off projects can also improve efficiency.
Effective recruitment plays a central role in overcoming workforce challenges. Platforms like iRecruit.co are setting an example by offering access to pre-screened candidates with relevant, mission-critical experience. Their flexible pricing models and 90-day replacement guarantee help mitigate the risks of turnover. With record crew sizes and competition for skilled trades across data center, semiconductor, and energy infrastructure projects, locking in talent early is a must.
The colocation pipeline through 2026 requires a reimagined approach to workforce planning - one that emphasizes disciplined execution, leverages technology to make the most of limited labor, and collaborates with recruitment specialists who understand the unique demands of this sector. For those looking to dive deeper into workforce strategies and broader trends in data center construction, there are resources available to help navigate this rapidly changing landscape.
The main hurdle in increasing colocation capacity through 2026 is labor shortages. This includes a shortage of skilled workers and limited execution capabilities. These issues have a direct impact on project timelines and make scaling efforts more challenging.
Texas is quickly emerging as a top destination for colocation development in the U.S., thanks to its strong growth prospects, affordable land, and faster access to the power grid. These factors are setting the stage for Texas to potentially overtake Virginia as the leading hub for data center construction by 2026. With these advantages, Texas has become a prime location for large-scale data center initiatives.
To keep projects on track and avoid delays, data center developers should focus on bringing in key professionals like project managers, MEP (mechanical, electrical, and plumbing) coordinators and engineers, and commissioning specialists. These experts play a crucial role in overseeing feasibility studies, managing design and systems integration, and ensuring that all systems are fully compliant and ready before the launch.
