Advanced Technology Market Trends Q2 2023
by Andy Andres and John Arcello
Mission Critical and Advanced Manufacturing construction markets continue their growth in 2023.
The world’s dependence on digital infrastructure continues to grow exponentially year over year, prompting an urgency for more data centers to store, process, and connect our data. Data center demand is arguably the strongest of any real estate sector, and hyperscalers continue to be the largest users. Low vacancy rates in colocation/multi-tenant data centers will continue to fuel new supply growth. According to Greet Street Advisors, while the rate of growth (CAGR) in the U.S. will slow over the next five years compared to the prior five, the amount of supply put in place annually will nonetheless rise significantly. McKinsley & Company forecast U.S. data center demand to grow approximately 10 percent a year until 2030.
Government incentive programs fueling tech sovereignty continue to influence spending in the semiconductor, electric vehicle, and lithium-ion battery spaces. Semiconductor Industry Association (SIA) tells us that despite a short-term cyclical downturn in 2022, the global semiconductor market’s long-term outlook is strong. And with lithium mining fueling the electric vehicle revolution, Goldman Sachs forecasts EVs to be half of global car sales by 2035. Current long-term trends in international geopolitics and associated legislation are driving re-shoring in these same areas, bringing manufacturing closer to home with both new and expanded facilities. Environmental and economic challenges are driving wider adoption and demand for these technologies.
Looking at the priorities of our customers building data centers or advanced manufacturing facilities, there are a few common priorities we’re seeing today.
The global demand is growing significantly and competition to deliver the supply with speed and low margins is prominent. Furthermore, government and trade organizations are very focused on bringing both compute and manufacturing capabilities within their control and soil.
Amongst the priorities you can expect, such as speed to market and controlling or reducing costs, there are a couple existential priorities we see our customers focused on to serve their business:
Cost and Schedule Certainty
Construction costs have escalated, lead times for mechanical and electrical equipment have reached unprecedented durations and demand for skilled labor remains consistent. Increasing lead times have manufacturers choosing not to quote materials until they are ready to manufacture them. Craft labor is in demand with 69% of firms expect to increase their headcount over the next 12 months.
Data center sustainability will be more important than ever in 2023. As governing bodies, financial investors, developers, and enterprises are all pressured to accelerate programs serving clean and renewable energy, water conservation, and decarbonization, our customers are focused on different tactics and competitive advantages to grow their market share.
Renewable energy production in the U.S. surpassed coal becoming the #2 energy source by type in 2022. Renewables are driving higher demand for stationary storage—in the form of lithium-ion batteries—and other power electronic components funded through recent government incentives, which require components to be manufactured in the U.S. to qualify.
How Can We Help?
DPR is focused on delivering longer range options and bringing more control of the supply chain in house to serve our customers through utilization of Digital Building Components and EIG as two examples.
We have focused on customers wanting to work collaboratively in planning and procuring their projects in multiple global locations, including aspects of design, VDC, self-performed scopes of work, prefabricated building components, MEP, and supply chain management.
Our Advanced Technology core market team is focused on expanding our preconstruction services to provide embodied carbon studies and metric tracking to influence design decisions, alternative means and methods in construction, and carbon accounting for our customers.
Photo: Adam van Noort
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Posted on April 12, 2023