#Japan #Tokyo #Data Center #construction costs #Turner & Townsend

Turner & Townsend Report Analyzes Data Center Construction Costs

On November 25, 2025, Turner & Townsend, a UK-based construction management company based in Minato, Tokyo, unveiled its "Data Centre Construction Cost Index 2025-2026" at a media roundtable conference. This report analyzes construction cost trends across 52 markets globally, revealing that both Tokyo (US$15.15/W) and Osaka (US$14.12/W) have secured spots in the top ten of construction costs worldwide.

The event emphasized the growing interest in global data center investments and development trends while discussing the challenges and opportunities within the Japanese market.

Increasing Demand for AI Data Centers

The roundtable began with an introduction to Turner & Townsend’s global operations, which span across 62 countries and involve collaboration on construction projects in fields including real estate, infrastructure, and energy. At the event, Director Minoru Parijen, who oversees data centers in East Asia, presented insights from the latest report. The report analyzes data center construction costs based on over 300 active or recently completed projects in more than 20 countries, acting as a critical indicator of market changes driven by the growing demand for AI.

According to the findings, revenues generated by the global data center market are expected to reach US$527.5 billion by 2025.

Rising Costs and Constraints in Power, Cooling, and Workforce

Discussing the data center landscape globally, particularly in Asia, Parijen noted an unprecedented structural constraint emerging from the "AI-first" demand, affecting power supply, cooling, and labor availability. Traditional air-cooled data centers have seen an average annual construction cost increase of 5.5%, while those transitioning to liquid cooling systems in the U.S. face additional premium costs of 7-10%. More than half of the projects slated for the next one to two years are being designed to support high-density, liquid-cooled environments, intensifying the need for advanced cooling technologies.

Around 83% of respondents indicated their local supply chains are not keeping pace with the proliferation of cooling technologies. Notably,47% of respondents identified power supply as the largest obstacle to timely construction completion, exacerbated by vulnerabilities in power grids and difficulties in procuring local cooling components. Nevertheless, 73% of stakeholders maintained a bullish investment outlook, asserting the data center market's resilience against economic downturns despite the high-cost structure and infrastructure challenges.

The Asia-Pacific region is continuing robust growth in its data center market, with approximately 2,300 MW added to development plans spurred by the demand for AI infrastructure and cloud services.

Factors Driving High Data Center Construction Costs in Japan

In discussing the trends affecting data center construction costs in the Kanto and Kansai regions, Parijen emphasized an extraordinary impact that is challenging conventional market wisdom. Since 2020, general construction costs have increased by 38%, while data center costs have skyrocketed by approximately 145%. He attributed this surge to Japan’s heavy reliance on imported equipment and the consequent vulnerability to foreign exchange rates. Furthermore, the power and cooling systems needed to support high-density servers differ significantly from standard buildings, complicating the recruitment of specialized technicians, thus highlighting the intricate nature of pricing forecasts.

The report suggests that Japan's construction costs remain elevated compared to other nations, primarily due to labor shortages. Parijen stressed the urgent need for skilled labor in specialized fields such as electrical and HVAC, directly influencing the overall pace of data center development. Moreover, the high demand for data center space specifically in Japan also contributes to rising costs. Factors contributing to Japan’s appeal include stable infrastructure for power, communications, and water, low risks of terrorism attributed to political stability, and advanced seismic resilience technologies, positioning Japan as one of Asia’s most favored data center locations.

Future Outlook of Data Center Construction Costs

During the Q&A session, media representatives inquired about future projections for data center construction costs. Parijen responded that an upward trend in construction costs is likely to persist in the near term. The complex requirements arising from AI-compliant data centers—including increased density, liquid cooling, and enhanced power infrastructures—are making costs inevitable for the foreseeable future. He further noted that rather than waiting for costs to drop naturally after exceeding a certain threshold, it is crucial to reconsider the fundamental methods of project execution at this early stage.

He suggested the implementation of Construction Management (CM) approaches, which focus on a comprehensive management perspective prioritized toward the client’s interests. This method emphasizes transparency and overall optimization, gaining traction in international markets. Despite a common perception that CM methods lead to inflated costs, Parijen explained that overall construction expenses are often optimized in comparison to traditional lump sum contracts, making it a promising option for Japan's anticipated surge in AI-oriented facilities.

Data Centre Construction Cost Index 2025-2026

This index calculates the construction costs of data centers in major global cities in terms of "US dollars per watt" (US$/W). It compiles benchmarking cost data from over 300 projects across more than 20 countries, which are either operational or recently completed. Key capital cost items collected include shell and core, architectural finishes, mechanical and electrical systems, general contractor contingencies, and margins. The total costs are converted to U.S. dollars based on average exchange rates from October 1, 2024, to October 1, 2025.

For more information on the detailed findings, refer to the full report here.

About Minoru Parijen

Minoru Parijen, Director of Turner & Townsend's Data Centre Division for East Asia, specializes in the dynamics of the data center construction market. He closely monitors the rapid growth driven by digital technologies, AI, and cloud computing within major cities across East Asia, including Japan, China, Korea, Taiwan, and Hong Kong. Parijen possesses deep insights into the challenges facing the market, such as power supply issues, workforce shortages, and rising labor costs. He offers strategic insights into the risks and opportunities for data center investments from a global perspective.

About Turner & Townsend

Turner & Townsend is a global construction management firm with over 22,000 employees in more than 60 countries. They collaborate with clients in real estate, infrastructure, energy, and natural resources, specializing in large programs, projects, cost and commercial management, net zero, and digital solutions. Turner & Townsend is majority-owned by CBRE Group, the world's largest commercial real estate services and investment firm, with several partners holding other significant minority interests. Visit their website for more information: Turner & Townsend Website.