By: Greg Perruzzi Chris Carucci Joshua Martinez Guy Silvey John LeJeune
The race to build the infrastructure powering AI, cloud computing, and services is accelerating at an unprecedented rate. The global data center market is projected to grow from $287.5 billion in 2026 to $662.7 billion by 2033, at a CAGR of 12.7% from 2026 to 2033.1
From hyperscale campuses in the United States to major expansion projects across Europe, developers are investing billions to meet surging demand for digital infrastructure.
Data center projects are usually fast-tracked, highly complex, and carry a unique risk profile. From high-value equipment and supply chain pressures to sustainability expectations and worker safety, the stakes and levels of scrutiny are high.
Reducing the total cost of risk (TCOR) requires risks to be identified, managed, and mitigated throughout the project life cycle. Drawing on experienced risk specialists can help stakeholders deliver safer projects while avoiding unnecessary costs and delays.
In this article, we examine the key risks shaping data center construction and strategies for managing these at every stage of the project life cycle, drawing on valuable insights from our in-house risk specialists.
Unique Risk Challenges in Data Center Construction
Data center construction combines compressed timelines, technical complexity, and heightened stakeholder expectations in ways few other construction projects do.
Clients involved in constructing data centers often have social responsibility goals established by their board of directors, so they tend to prioritize these objectives more than is typical in high-rise construction.
Unlike traditional builds, data center projects are often delivered at unprecedented speed while supporting critical digital infrastructure. Because of this, these builds require an approach known as trade stacking, where multiple trades work simultaneously to meet surging demand. While this can improve efficiency, it can also increase the risk of coordination issues and on-site incidents.
Supply chain pressures add another layer of complexity. When dealing with critical components, such as generators and switchgear, procurement decisions often need to be made early.
The industry also faces skilled labor shortages, particularly among electricians and commissioning specialists.
"There is also an increasing demand for safety personnel, especially in industries such as semiconductors and data centers. There is a significant shortage of truly qualified candidates," adds Silvey.
Stakeholders also see increased regulatory scrutiny, heightened ESG expectations, and community concerns about water use, noise pollution, and power demand. If left unaddressed, these pressures can contribute to project delays, safety incidents, and higher total costs.
Starting Early: The Pre-Construction and Environmental Planning Phase
Many of the risks that shape a data center project emerge long before construction begins. Effective planning can strengthen long-term resilience.
Site selection plays a crucial role in the long-term success of a project. Water availability and power capacity are among the most critical considerations, especially when building in a region where other data centers are already present. Planning in advance can reduce strain on local water sources and electrical grids.
Water and power aren't just utilities; they're critical constraints that can define whether a project succeeds or fails.
Environmental considerations extend beyond water and power. Biodiversity impacts and ecosystem disruption can influence project timelines. Environmental monitoring, compliance with Occupational Safety and Health Administration (OSHA) exposure limits, industrial hygiene expertise, and LEED-aligned material choices can support both compliance and sustainability goals.
Community impact is another key consideration. Noise levels can increase during activities such as blowdown, in which water is forced through the cooling system. Resource consumption and round-the-clock operations can also influence community sentiment.
By identifying potential challenges early, organizations can help reduce delays, limit reputational risks, and reduce the TCOR across the project life cycle.
Managing Safety and Risk Exposure: The Construction Phase
The next stage brings a new set of challenges, combining complex systems, and heightened operational risk. Data center projects often involve multiple contractors, subcontractors, and multilingual workforces operating simultaneously, making clear communication critical to site safety and coordination.
Worker welfare, safety performance, and environmental compliance remain key priorities throughout construction. This can be particularly challenging on projects in remote locations, where transportation, accommodation, health care access, and worker wellbeing require planning.
When basic needs, such as cooling stations or proper break areas, aren't in place, workers notice. If they feel the project doesn't value their wellbeing, engagement drops and so does safety. Getting the site set up right from the start sets the tone for everything that follows.
Construction risks vary in severity and frequency. Cuts, strains, and sprains are among the most common workplace incidents.
Higher-severity risk can arise during hazardous energy management and lockout/tagout procedures, where failures in control measures can result in serious injuries or fatalities. Dedicated oversight and clearly defined safety responsibilities can help reduce these risks.
OSHA penalties for safety violations can reach up to $165,000 per offense.2 The operational consequences can be equally significant, with 1,032 fatalities reported among construction and extraction workers in 2024.3
Other factors that contribute to a safe project life cycle are training, clear communication, and continuous supervision of all workers. Comprehensive safety programs and environmental monitoring, alongside experienced safety personnel, can help reduce both the frequency and severity of incidents.
The goal is to create a self-contained ecosystem where health and safety risks are managed on-site, especially in remote locations.
Handling Long-Term Risks: The Post-Construction Operational Phase
Once construction is complete, organizations face a different set of challenges centered on keeping critical systems running reliably while managing long-term operational exposures.
The most common issues include equipment failure, cooling inefficiencies, and the rising operational costs and resilience challenges associated with maintaining power and cooling systems around the clock. These challenges can create new and continually evolving risk exposures, particularly as regulatory concerns and community scrutiny intensify.
Organizations may also face long-tail claims risks that emerge months or even years after construction has been completed. In data center projects, these concerns may not be identified until the facility has been operating for an extended period.
Ongoing risk management, monitoring, and effective claims handling can strengthen operational resilience while controlling the TCOR throughout the life cycle.
Effective Risk Management: Investigations and Claims Responses
Even with strong risk controls in place, incidents can occur.
A clear response framework can help organizations investigate incidents, preserve critical information, and coordinate claims management efforts. This includes access to investigation teams, legal counsel, and specialized claims expertise.
Moreover, technology plays a key role in prevention and response. Tools such as drones, cameras, and wearable alerts provide greater visibility across construction sites.
Combined with experienced safety professionals and specialized construction claims expertise, the use of technology can strengthen investigations, improve incident response times, and support more effective outcomes.
Investigations shouldn't be treated as an afterthought. They need to be part of a broader risk management strategy that begins at the planning stage and continues through the entire project life cycle.
Key takeaways
- The biggest risks in data center construction occur before the construction even begins. Early planning can have a lasting impact on the TCOR.
- Speed to market and effective risk management aren't competing priorities. Organizations that focus on both are better positioned to control costs and reduce claims exposure.
- Investing in worker wellbeing, site conditions, and training can strengthen safety performance and reduce claim frequency.
- Some of the most costly claims can arise months or even years after construction is complete, making ongoing monitoring and effective claims management essential.
- An integrated approach to risk, safety, and claims can strengthen resilience throughout the project life cycle.
Get in touch with our specialists today
Organizations that combine proactive planning, strong safety practices, and coordinated claims and risk management are better positioned to deliver successful project outcomes while controlling the cost of risk.
Gallagher Bassett provides coordinated, end-to-end risk management, and claims solutions that support data center projects from planning and construction through to ongoing operations. Contact our specialists to learn how we can help reduce risk across the project life cycle.
Authors
Chris Carucci
Joshua Martinez
Guy Silvey
John LeJeune CIH, CSP
Sources
1 "Data Center Construction Market (2026-2033)," Grand View Research, Jun 2026.
2 "US Department of Labor Announces Adjusted OSHA Civil Penalty Amounts For 2025," OSHA, 14 Jan 2025.
3 "National Census of Fatal Occupational Injuries in 2024," Bureau of Labor Statistics, 19 Feb 2026. PDF file.
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