Both the Advanced Manufacturing and Mission Critical sectors in the U.S. are in a construction boom, with no signs of slowing down anytime soon.

While speed-to-market remains a top priority, owners are also realizing that power, land, and labor constraints are impacting this goal in real ways.

To exacerbate the demand for power, owner/operators of manufacturing facilities and data centers, as well as increasing demands for EV charging infrastructure, are creating significant competition for access to available power capacity.

Below we’ll take a deeper dive into what’s driving both the Advanced Manufacturing and Mission Critical sectors.

Despite some tailwinds in 2023 due to market realities around labor and equipment availability, long-term growth is projected to be strong in 2024 and beyond.

This growth continues to be driven by long-term on-shoring, government and corporate policies, aided by government incentives largely taking the form of tax credits supplemented with production incentives. The first round of tax credits was recently announced, releasing $4B of the planned $10B based on an applicant pool of over $42B. These credits require prevailing wage and apprenticeship programs for the labor contracted to build them and DPR’s Self-Perform Work apprenticeship programs help Owners qualify.

This is part of a larger program to support manufacturing growth in the U.S., headlined by the CHIPS & Science Act (CHIPS) and the Inflation Reduction Act (IRA). CHIPS promises $280B in spending for new or expansion projects over the next 10 years and IRA $737B in energy security and climate change investments, as well as the aforementioned tax credits for clean energy production and carbon emission reductions.

Look next to secondary supply chain suppliers seeking to build domestically to support their clients in the larger battery, solar, and semiconductor ecosystems. Understanding the funding mechanisms of these clients and how they relate to timing of the larger supply chain is critical in setting up the construction deal.

While there have been some local dips in EV adoption, both global adoption and U.S. policy point towards long-term growth. Recent announcements of manufacturers increasing their focus on producing hybrid vehicles will still require batteries and the long-term shift to electrification of the grid will continue.

Optimism is higher than ever, as the data center industry continues to see substantial growth in both established and emerging market geographies. Global inventory is projected to grow 10% annually over the next five years, with the highest growth being in the U.S. (Green Street Advisors Data Center Update March 2024).

The world’s continued transition to the Cloud, growth in IoT, data residency, sovereignty and localization, and increasing volumes of data generated by consumers and business on a daily basis continue to drive data center development globally.

Generative AI and machine learning are triggering a shift in data center design, site selection, and investment strategies.

Data centers supporting AI are utilizing different topologies and cooling technologies to accommodate growing compute workloads. Compute densities are increasing, and direct-to-chip liquid cooling has been the predominant and most efficient cooling solution to date. Building and campus footprints are expanding, with increased fiber network connectivity required for GPU clusters.

With limited power and land availability in most primary and some secondary geographies, more and more hyperscalers, developers, and operators are shifting their focus to development in emerging markets. Owners are looking for sites with access to fiber and renewable energy, although transmission lines across the U.S. need substantial upgrades to enable more geographies to tap into available renewable energy. Owners are also considering alternative and clean energy sources for primary and backup power, like hydrogen fuel cells and small modular reactors.

With increasing activity and long-term growth projections, new players are entering the data center development space. Data centers stand out as a promising real estate asset class, with many asset classes seeing a pullback for developers and investors. Many of these new players come from the commercial development, industrial warehouse, and office sectors. Private equity firms are also entering the space, looking to capitalize on a sure-thing investment. Vacancy rates for colocation space are as low as 2% in primary and some secondary geographies, leading to higher lease rates.