Artificial intelligence is driving a surge in data center demand——but can the supply chain withstand the pressure? Nikki Venetsanakis, Head of Advanced Technology UK & Europe at Rider Levett Bucknall, analyzes this question.

Rider Levett Bucknall's second annual data center trends report shows that the industry is experiencing unprecedented growth.

Last year, more than 470 data center operators and contractors told us they expected capacity in service to grow 65% over the following 12 months.

This year's report, however, surveyed more than 535 data center stakeholders and found that demand has exceeded expectations: capacity in service has surged by nearly 300% since 2023, and operators' average capacity will reach 47 megawatts by 2025.

Key Drivers of Growth

An influx of private equity investment, combined with AI-driven demand, is accelerating the need for energy, power density, and liquid cooling technologies. Operators expect 61% of their data centers to adopt liquid cooling by 2030, and 73% of respondents say data center customers' requirements for power density are steadily rising.

The data center retrofit market is also expanding, with 66% of respondents planning to retrofit at least a quarter of their data centers within the next five years.

Supply Chain Challenges and Cost Pressures

Despite the industry's rapid growth, the supply chain still faces severe challenges. More than 70% of respondents believe the supply chain cannot keep pace with development, and 53% worry that the industry cannot meet capacity demand.

To make matters worse, rising costs are hitting the market, with average prices expected to increase 5% year over year — 3.0% for uninterruptible power supplies (UPS), 2.8% for battery energy storage systems, and 2.2% for generators.

Seizing Opportunities Through Strategic Planning

However, RLB believes that rapid growth and supply chain constraints present both challenges and opportunities.

To address these constraints, industry leaders must take a proactive, forward-looking approach. Engaging suppliers early, planning flexibly, and adapting to market changes are all essential.

Currently, only 21% of companies have expanded their supply chains, and fewer than one in five respondents have adopted vendor-managed inventory (VMI) agreements — indicating that the industry still has room to improve its ways of working.

Ten Key Strategies to Enhance Supply Chain Resilience

1. Retrofitting aging data centers: data centers 10-15 years old can meet multiple needs, including supporting AI requirements and improving efficiency to comply with new regulations. Early-stage design and commercial evaluation are critical to cost-effective retrofits.

2. Choosing strategic locations: work with designers to develop cost-effective facilities in high-growth regions, while considering infrastructure, current and future power availability, and analyzing zoning regulations and local permitting processes.

3. Leveraging data for better decisions: implement information management systems to ensure real-time, accurate data is available during decision-making.

4. Innovating energy supply: think beyond traditional mindsets, envision the future of energy, and consider innovative solutions and long-term strategies. Consider partnering with local energy suppliers or exploring small or micro modular reactors.

5. Ensuring regulatory compliance: when building or retrofitting facilities, ensure their certifications and standards comply with current regulations, such as LEED and BREEAM.

6. Ensuring connectivity and sustainability: besides power supply, ensure adequate fiber connectivity for high-speed, low-latency data transmission, and secure a sustainable water supply.

7. Using digital technology to improve supply chain visibility: real-time analytics and dashboards help identify potential disruptions before they occur.

8. Prioritizing design adaptability: modular design and construction techniques enable facilities to adapt to changing workloads, emerging technologies, and supply chain constraints.

9. Building supply chain resilience to reduce risk: identify risks related to regulations, trade policies, and cybersecurity threats. Diversify the supply chain to avoid over-reliance on a single supplier.

10. Monitoring geopolitical risks: collaborate with experts to explore alternative suppliers and logistics routes to reduce potential disruption risks.

With demand growing faster than expected, delivering projects on time and within budget calls for a strategic, forward-looking approach to planning. Innovation and collaboration——especially engaging suppliers early——are crucial to ensuring the scalability and sustainability of future infrastructure.