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Building New Data Centers

Building New Data Centers

April 22, 2025 General No Comments

Building a new data center involves addressing several critical issues to ensure operational efficiency, scalability, and cost-effectiveness.

I’m going to hit on some the key issues and typical costs here to expect on projects like this. First up is location selection. Urban areas (e.g., Silicon Valley, New York) have higher land costs, while rural areas are cheaper but may lack infrastructure like reliable power or fiber optic connectivity. At that time we had already built out two data centers in Saint Louis which were fiber connected.

Access to multiple internet providers and dedicated fiber optic connections is essential. A mile of fiber optic cable can cost up to $250,000.

And then you need to address and comply with local zoning, environmental regulations, and tax incentives (when available).

Infrastructure Design and Tier Classification:
Uptime Institute Tiers: Data centers are classified into Tiers I-IV based on redundancy and availability (99.671% to 99.995%). Higher tiers (e.g., Tier III or IV) require more robust power and cooling systems, increasing costs.

Scalability: Design for future growth to avoid costly retrofits. Scalable designs may add upfront costs but save money long-term.

Modular vs. Traditional Construction: Modular data centers, built off-site, can be 30% cheaper due to economies of scale and reduced construction time.

Power and Cooling Systems:
These account for 40-45% of total costs, including utility power, backup systems (e.g., UPS, diesel generators), and energy-efficient technologies to reduce power usage effectiveness (PUE). On a side note, allocate a maintenance plan for the diesel fuel generators. With millions of dollars on the line, the last thing you need would be for both generators to fail at the same time.

Cooling Infrastructure represents 15-20% of costs. Advanced cooling (e.g., liquid cooling for AI data centers) is more efficient but costlier upfront. And let’s face it, AI is the future of technology at the moment.

IT Equipment and Software:
Servers, storage, and networking equipment account for a significant portion of capital expenditure (CapEx). Compliance with software licensing agreements is also critical to avoid fines. Software asset management tools may be needed. Implementing AI (e.g., AIOps) and automation for tasks like server provisioning reduces labor costs and downtime but requires a substantial initial investment.

Construction and Supply Chain:
Cost can definitely become a critical issue due to poor planning, supply chain disruptions, or scope changes. And of course, fire marshals can put the kibosh on a project real quick.

Lead Times: Material and equipment shortages, exacerbated by the confusion over tariffs, can delay projects and increase costs.

Operational Costs (OpEx): This encompasses staffing, scheduled maintenance, and power consumption.

Security and Compliance:
This includes biometric access, CCTV, and fire suppression systems, with costs increasing for higher-tier facilities. Add in cybersecurity protection because cyberthieves never sleep.

Typical Costs
Costs vary widely, so what I have here has been derived from available data, assuming U.S. national averages.

Capital Expenditure (CapEx)
Construction costs are estimated to be $600 to $1200 per square foot, depending of course on
location and features.

Per Megawatt: $7 million-$12 million for a standard data center; up to $14 million in high-cost regions like Europe or $20 billion per gigawatt for AI-focused data centers.

Examples:
Small Data Center (10 racks, ~140 servers): $200,000-$500,000.

Medium Data Center (Tier II, 160 racks, 800 kW): ~$11.5 million.

Large Data Center (Tier III, 160 racks, 1,600 kW): ~$38.3 million.

Hyperscale Data Center (>250 racks): Tens of millions to billions (e.g., Apple Campus 2: $5 billion).

Breakdown:
Land and Shell: 17-21% of total costs ($105-$235/square foot).

Power Infrastructure: 40-45%.

Cooling Systems: 15-20%.

IT Equipment: ~40% for general-purpose centers; up to 66% for AI data centers.

Other Costs:
Permits and Taxes: $70/square foot additional.

Operational Expenditure (OpEx)
Annual Costs:
Small Data Center: ~$10 million for minimal commercial setups.

Large Data Center: $10 million-$25 million, driven by power, staffing, and maintenance.

Power Costs: $100,000 per megawatt; dominant ongoing expense.

Example: A large data center with 3,500 servers may exceed $1 million/year in electricity alone.

Regional Variations
United States:
Tier-1 markets (e.g., Silicon Valley, New York): $9.5 million/MW, $1,000/square foot.

Cost-effective markets (e.g., Dallas, Atlanta, Utah): Lower land and construction costs.

Europe: $14 million/MW, $1,200/square foot (e.g., Frankfurt, London).

Asia-Pacific: ~$12 million/MW (e.g., Tokyo).

AI Data Centers
Higher Costs: Due to specialized hardware (e.g., GPUs) and advanced cooling (liquid cooling is 17x more effective than air). A data center with 100,000 AI accelerators could cost billions, with 2/3 of the budget for IT equipment.

AI facilities typically require 30 gigawatts for hyperscalers, with costs up to $20 billion/gigawatt.

Just a quick update. We refresh our stock monthly and are among the few providers offering the latest Ryzen, EPYC, Threadripper, GPUs, and AI servers.

Additionally, we can deploy servers with IPv6 (up to 48) and IPv4 (up to /25 for new clients) as needed. Our commitment to 100% uptime and top-tier customer service remains stronger than ever.

Why Choose ProlimeHost?

Premium Datacenters: Fully redundant, 100% uptime SLA.
Robust Network: Terabits of connectivity with dozens of providers & peering along with Noction IRP Route Optimizer for the best connectivity.
Massive Inventory: High-clock CPUs, large storage setups, and cutting-edge GPUs.
Proven Stability: 21 years in industry with over 40 full-time staff.

Steve
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