STL Partners reports that delays in data centre construction could drain developers of nearly US$15 million per month. This alarming figure not only underscores the financial ramifications of inefficiencies but also highlights the critical need for enhanced reporting mechanisms.
The research, Preventing multimillion dollar data centre losses through reporting, indicates that for a typical 60 MW data centre in the US, internal rate of return (IRR) can plummet by more than 25% due to construction holdups.
The Internal Rate of Return (IRR) is projected at 17.1% if projects proceed on schedule, but this figure drops to 15.5% with just one month of delay and further declines to 12.6% after three months. Such significant reductions pose serious threats to investor confidence and future funding.
Jonas Topp-Mugglestone, a consultant at STL Partners, emphasises the importance of timely and effective reporting. “Data centre projects don’t simply fail because problems arise – they fail because teams see these issues too late,” he asserts.
“With delays costing data centre developers more than US$14 million a month, reporting isn’t just operational hygiene – it’s the difference between hitting targets and wiping out returns.” Jonas Topp-Mugglestone
In an era where operational efficiency is paramount, fragmented and manual reporting processes are identified as the primary culprits behind these costly delays.
The report advocates for structured, real-time reporting as a vital tool to mitigate these challenges. “Effective reporting ensures early risk detection, faster issue escalation, and real-time decision-making, which can bridge the gap between disruption and response,” elaborates Topp-Mugglestone. This proactive approach is essential for maintaining delivery timelines and safeguarding investor interests.
Standardised and automated reporting frameworks not only provide project managers with increased visibility and control but also prevent minor issues from evolving into major setbacks. Topp-Mugglestone warns that delay isn’t just a construction risk – it’s a financial one. For investors, even a brief setback can complicate funding models and threaten overall project viability.
As the demand for data centres continues to surge across Asia, the urgency for operational excellence in construction projects intensifies. COOs and heads of operations must prioritise the implementation of robust reporting systems to avert costly disruptions and bolster investor confidence.
The STL Partners report serves as a reminder that in the competitive landscape of data centre development, the difference between success and failure may well hinge on the efficacy of reporting strategies. Embracing these changes could prove transformative for the operations of developers in the region.
