AI, cloud drive global data center building surge

Global demand for data centers is exploding as artificial intelligence (AI) and cloud computing reshape the infrastructure of the digital economy, according to a new report from Allianz Commercial.

Spending on data centers is projected to reach up to USD 7 trillion by 2030, driven largely by tech giants in the United States and China, while Europe is expanding at a slower pace.

Amazon, Microsoft, and Google Cloud accounted for nearly two-thirds of global cloud revenue in the second quarter of 2025, with Chinese firms like Alibaba and Tencent also investing heavily in industrial-scale infrastructure and stable energy sources.

The Allianz Commercial report, The Data Center Construction Boom, outlines how this surge is transforming the construction sector with some projects now costing more than USD 20 billion, up from previous averages of USD 200 million to USD 300 million.

Average-sized data center facilities now cost between USD 500 million and USD 2 billion, requiring specialized insurance due to unique construction and operational risks.

“Construction projects as complex and extensive as data centers require significant time and resources,” said Darren Tasker, Head of Construction, Americas, at Allianz Commercial.

“Typically, they require project-specific policies given their size and their unique risk profile that demands specialized insurance,” he added.

The United States is poised to dominate the global market, with 81 gigawatts (GW) of data center power capacity expected by 2028—around two-thirds of global demand.

China is building out aggressively, with Greater Beijing alone accounting for about 10% of global hyperscale capacity.

In Europe, pipeline activity is growing at 43% annually, led by London and Dublin (each exceeding 1GW), with major hubs also in Amsterdam, Frankfurt, Paris, and Milan.

“The bigger data centers have a huge footprint,” said Chris Fancher, US Head of Construction Property at Allianz Commercial.

“The scale of a USD 20bn+ facility can involve tens of thousands of workers on site at peak times, with significant equipment and building supplies moving in and out,” he added.

“Timings can be tight. This requires expert coordination, as any missteps or faulty workmanship can lead to potential losses or costly delays,” Fancher said.

The global electricity demand from data centers is projected to double to 945 terawatt-hours (TWh) by 2030, exceeding the total electricity consumption of Japan, which has a population of 124 million.

To address power supply risks, which account for 45% of impactful outages, operators are increasingly generating their own energy using renewables, gas, or small nuclear reactors.

Fire, overheating, and water use are also major concerns, particularly as lithium-ion batteries—known for their flammability—are more widely used in server racks.

Some large-scale facilities use up to 19 million liters of water per day for cooling, equivalent to the daily consumption of a town with a population of 50,000.

Climate change has also raised the vulnerability of more than half of the world’s top data center hubs, increasing operational and insurance costs.

Asia-Pacific accounts for about 30% of global capacity and is expected to grow 21% annually from 2024 to 2028, with China, Japan, and India leading in installed capacity.

Emerging markets such as India, Malaysia, and Indonesia are forecast to drive the next wave of data center expansion.

“As the demand for data centers in the region surges, it is crucial that parties fully understand the risks involved during construction and operation,” said Christian Sandric, Regional Managing Director of Allianz Commercial Asia.

“Beyond the main risks such as power supply, rising construction costs and supply constraints, fire, and cooling requirements, parties also need to consider aspects such as cyberattacks, and impact on the surrounding environment, ecosystem, and infrastructure,” he said.

“For example, cooling systems may discharge heated water back into local water bodies, and this can raise temperatures and affect aquatic ecosystems,” Sandric added.

“These complex and extensive risks call for specialist insurance and expert risk-management guidance, and clients need to work with an experienced team of underwriters who knows the business and can support the project from beginning to end, including multi-year coverage and policy extensions as needed,” he said.