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US data-center construction spending climbs 73% to an $85 billion annual rate
US data-center construction spending rose 73% in a year to an $85 billion annual rate, Census Bureau figures for August show. Factory construction still runs at nearly twice that rate, and builders are paying about a tenth more for materials and services than a year ago.
The Investor · Invest desk
What happened
- August alone added 7.5% to the data-center spending rate over July.
- Since the beginning of 2021, the annual rate of data-center construction spending has risen 823%.
- Power-sector construction rose 8.5% over the year to a $186 billion annual rate and is up 58% since the start of 2021.
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Why it matters
- cost Adjusted for the 9.4% rise in construction-services prices, factory building is down about 27% in real terms, a steeper cut in volume than the dollar figures show.
- constraint Power plants need years of planning and permitting before construction starts, so generation spending cannot speed up on the schedule data-center shells are going up.
- exposure Data-center sites face municipal and state efforts to slow or block them, Texas included, now that power demand and electricity prices have entered midterm campaign rhetoric.
Added together, data-center and factory construction ran at about $253 billion a year in August, roughly $5.6 billion below their combined rate a year earlier [3]. The data-center line added about $36 billion over those twelve months, from roughly $49 billion [1]. Factories lost about $41 billion, from roughly $209 billion [2].
Two adjustments shrink the data-center gain without reversing it. The first is price. Deflated by the producer price index for nonresidential construction services, up 9.4% over the year [13], the 73% nominal increase [1] is about 58% in real terms [4]. Wolf Richter of Wolf Street, who reported the Census figures, dates a second wave of construction inflation to the start of 2025, and the materials index is up 15.8% since then [12].
The second is scope. The Census figure covers the building, the improvements around it and built-in equipment such as HVAC. It leaves out servers, racks, networking gear and the electrical equipment that powers them, often including on-site generators [4]. "But that's the cheap part of a data center," Richter wrote [5]. Factory figures also exclude production equipment such as robots and chipmaking systems [8], so the factory comparison is shell against shell. The power series counts generation equipment [10], so it does not compare cleanly with either.
I think the plainest reading is substitution: contractors and crews that a year ago were building factories are now building data centers, and factory projects are what they are not building. The counter-case is that the two lines have different owners with unrelated reasons to spend or stop, and the offset is a coincidence of timing. The connection in the source is labor. Richter reports shortages on other projects as specialists are pulled to data-center jobs [14], and wrote of those projects' "whatever-it-takes approach to spending" [15].
Data centers alone now run above the roughly $74 billion a year that factory construction averaged from 2015 through 2020 [6]. Richter, who describes the data-center curve as near-exponential for now [18], wrote that "nothing that needs to be funded can grow on an exponential curve for long" [17]. Compounded for twelve months, August's monthly gain would take the annual rate to about $202 billion [8].
What to watch
- The factory line in the next Census releases: if it steadies near $168 billion while data centers keep rising, the combined total grows and the substitution reading fails.
- Coming producer price readings for construction materials and nonresidential services, both running near 10% a year, for whether builders' cost inflation slows.