Data centers are finding new homes in old buildings

The cost of data center conversions

Besides the shorter timeline, another push factor for investors to pursue conversion is the potential savings, with costs going to building modifications rather than building a facility from ground up.

The savings generated can be used to offset the surge in raw material costs — exacerbated by supply chain disruptions — which has led to overpriced installations in data center projects, according to JLL’s H1 2022 Global Data Center Outlook.

This makes conversions, which require less materials than new builds, an attractive lower-cost alternative that limits exposure to these material inflation challenges.

In densely populated cities like Hong Kong, however, it can quickly become cost-prohibitive to convert an existing building into a high-rise data center, according to Street.

“The structural additions needed to modify an office building can be quite complicated,” he says. “For instance, these buildings typically won’t have the sufficient slab-to-slab height clearance that is a prerequisite for high-density data centers.”

For emerging markets, especially in Southeast Asia, the lack of suitable brownfield sites with the right structural attributes, most of which are aging and underdeveloped, also poses issues for operators seeking to convert old buildings into hyperscale data centers.

But such structural attributes are just part of the key considerations for site conversions. “Other than getting the physical structure right, ensuring the availability of access to power, water sources, and fiber connectivity is equally critical to the success of the project,” Street says.

Finding the right site that meets all criteria for conversion presents a major challenge due to differing needs of operators.

“Such conversions may not necessarily be suited for hyperscale developments which are driving the market, but enterprise or retail colocation operators could stand to benefit from projects coming on stream,” says Street.