By Industrial Infrastructure News Published: November 2024
Main Facts: The New Paradigm of Data Center Development
The modern digital economy runs on high-voltage electricity, massive volumes of cooling water, and complex webs of regulatory approvals. According to Lara Poloni, president of Dallas-based infrastructure giant AECOM, some of the most critical decisions in a multi-million-dollar data center construction project must be resolved long before a single shovel breaks ground.
Today, financial capital alone is no longer enough to guarantee the completion of these massive digital hubs. Developers are discovering that access to reliable utility grids, sustainable water supplies, long-term environmental permitting, and community buy-in are the true bottlenecks of the 21st-century tech boom. Consequently, a structural shift is underway across the architecture, engineering, and construction (AEC) sectors. Owners are moving away from traditional, siloed approaches, instead seeking specialized strategic advisory services early in the development lifecycle to manage escalating complexities.
Data centers are no longer viewed merely as commercial real estate assets or large warehouses filled with servers. Instead, industry leaders classify them as complex infrastructure ecosystems. Because these facilities trigger massive demands for supporting power generation, grid transmission, water management, and transportation networks, their development requires a holistic, integrated approach to design, risk management, and execution.
Chronology: The Evolution of Risk and Strategy in Infrastructure
To understand how the construction industry arrived at its current posture regarding data centers, one must look at how project risk has evolved over the past several years:
Pre-2020 (Traditional Delivery): Engineering and construction firms routinely engaged in high-risk delivery models, frequently taking on self-perform at-risk construction contracts and complex design-build arrangements. Risk was largely evaluated through narrow commercial and contractual lenses, with less emphasis on macro-environmental hurdles.
The 2020 Pivot: In response to pandemic-era supply chain disruptions, soaring inflation, and labor volatility, major professional services firms began fundamentally restructuring their operations. AECOM, for example, intentionally shifted toward a higher-margin, lower-risk professional services model. This involved divesting from non-core markets, exiting high-risk self-perform construction, and stepping away from asymmetric contract structures—such as design-build contracts within construction management portfolios.
The Post-Pandemic Boom (2021–2023): The explosion of artificial intelligence (AI), cloud computing, and big data exponentially accelerated the demand for hyperscale data centers. Developers rushed to secure land, but many encountered severe grid bottlenecks, water scarcity issues, and prolonged permitting delays, exposing the dangers of reactive planning.
The Modern Era (2024 and Beyond): Execution certainty has taken center stage. Developers now engage advisory firms years before construction begins. Modern project evaluation incorporates holistic checklists covering stakeholder alignment, utility dependencies, environmental compliance, and long-term resource availability. Furthermore, legislative and regulatory bodies are beginning to focus heavily on permitting reform to prevent infrastructure gridlock.
Supporting Data: Broad-Based Growth and Interconnected Markets
The boom in data center construction is not happening in a vacuum; it is the beating heart of a broader, multi-sector infrastructure supercycle. Industry metrics underscore several vital trends:
Broad-Based Backlogs: Major engineering firms are reporting record-high backlogs and project pipelines. Crucially, this growth is not restricted to a single sector; it spans transportation, water systems, environmental services, energy generation, and specialized facilities, both domestically in the United States and internationally.
The Infrastructure Ripple Effect: Every gigawatt of new data center capacity requires exponential investments in parallel sectors. For instance, data center growth directly drives capital expenditure in:
Power Generation & Transmission: Upgrading electrical grids to handle continuous, baseload power demands.
Water Systems: Expanding wastewater treatment and cooling infrastructure.
Transportation: Improving regional logistics to support heavy equipment delivery during construction.
Environmental Services: Managing carbon footprints, renewable energy procurement, and stringent ecological impact assessments.
Risk Mitigation Metrics: Leading firms have systematically reduced their exposure to volatile project delivery methods. For example, major enterprise portfolios have stripped out design-build liabilities entirely, save for rare, highly vetted exceptions, thereby protecting corporate balance sheets against unforeseen site-condition overruns.
Official Responses: Insights from AECOM President Lara Poloni
In an exclusive interview, Lara Poloni shared her perspective on the shifting landscape of project delivery, talent management, and risk evaluation.
On Project Opportunities and Interconnectivity
When asked about where AECOM is seeing the strongest market opportunities, Poloni emphasized the interconnected nature of modern developments.
"What’s particularly encouraging about the growth we are seeing in our record backlog and in our pipeline is that it’s broad-based," Poloni said. "We see growth opportunities across all our key markets of transportation, water, environment, energy and facilities, both in the U.S. and internationally."
Poloni noted that the boundaries between traditionally separate infrastructure sectors are rapidly dissolving.
"It’s also notable how interconnected these opportunities have become. Data center growth, for example, is driving investment in power generation, transmission, water systems, transportation infrastructure and environmental services," she explained. "The focus today is more on execution. Across the industry, owners are navigating increasingly ambitious projects that require certainty around permitting, schedules, resources and stakeholder alignment. The ability to anticipate challenges and manage complexity is becoming a major differentiator."
On Navigating Data Center Complexity
Addressing the operational realities of data center construction, Poloni stressed that these facilities demand a departure from standard commercial building practices.
"Today’s data centers should be viewed as complex infrastructure ecosystems, not simply buildings," Poloni stated. "Demand for data center capacity is accelerating at an unprecedented pace, but the real challenge is ensuring that the land, power, water, permitting and supporting infrastructure are in place to bring these projects online at the pace the market requires."
To overcome these hurdles, Poloni advocates for an integrated delivery model that fuses multiple disciplines from day one.
"The projects that move most successfully are the ones that solve these interconnected challenges together from the very beginning," she noted. "That means bringing together strategic advisory, environmental planning, permitting, utility coordination, engineering and program management. That allows decisions around site selection, infrastructure requirements and delivery strategy to be made with the full picture in mind. At this scale and pace, integration is increasingly a prerequisite."
On Workforce Constraints and Global Talent
As projects grow larger and more technically demanding, human capital has emerged as a critical variable. Poloni discussed how major firms are addressing workforce bottlenecks through technological innovation and global resource sharing.
"As projects become larger and more technically demanding, the industry’s challenge is having access to the right expertise at the right time," Poloni said. "That is why we’ve been investing at record levels in talent development, leadership programs and technical excellence over the past several years. We are also investing in technology and innovation that expand what our people can accomplish and create more capacity for our teams to focus on higher-value work and to solve our clients’ greatest challenges."
Furthermore, Poloni highlighted the power of cross-border collaboration under AECOM’s operational strategy:
"Our ‘Think and Act Globally’ strategy is another important advantage. The most specialized expertise is not always where a project happens to be. By connecting our people and capabilities across regions and markets, we can assemble multidisciplinary teams around the needs of a project and wherever demand is strongest."
On Evolving Risk Evaluation Frameworks
Reflecting on strategic adjustments made since 2020, Poloni detailed how her organization restructured its business model to insulate itself from asymmetrical risk profiles.
"Going back to 2020, we have been very intentional about creating a higher-margin, lower-risk professional services business," Poloni explained. "That included selling or exiting businesses and markets that did not align with our strategy, no longer pursuing self-perform at-risk construction and stepping away from certain contract structures with asymmetric risk profiles."
She added that this risk-averse posture extends deeply into everyday operational choices:
"We no longer pursue design-build contracts in our construction management business and, other than two projects referenced on our third quarter earnings call, have no other design-build projects in our construction management backlog or portfolio. We also fundamentally changed how we evaluate risk. The evaluation extends well beyond traditional contractual and commercial considerations to factors such as permitting, stakeholder requirements, resource availability and infrastructure dependencies."
On Permitting Reform and Future Trends
Finally, Poloni pointed to regulatory reform as a crucial, often overlooked catalyst for future infrastructure growth.
"One trend that deserves greater attention is the growing focus on permitting and project delivery reform," Poloni said. "Governments are recognizing that funding is only part of the equation. The ability to actually move projects forward matters just as much. We are seeing greater attention on accelerating approvals, streamlining permitting processes and removing barriers that can delay critical investment. Those efforts have the potential to unlock value and meaningfully improve outcomes across many sectors."
This shift in government mindset mirrors the changing demands of corporate clients, who are seeking expert guidance earlier in the project lifecycle than ever before.
"Clients are seeking advice much earlier in the lifecycle of major projects and programs," Poloni concluded. "Decisions made well before design or construction begins can have an outsized impact on cost, schedule, risk and outcomes. That is driving greater demand for strategic advisory and program management capabilities that help clients make those decisions with greater confidence."
Implications: What This Means for the Future of Construction
The transformation of data center construction from a standard real estate endeavor into an intricate, ecosystem-level engineering challenge carries profound implications for the entire construction and energy landscape:
The Rise of Early-Stage Advisory Services: Engineering, procurement, and construction (EPC) firms will increasingly pivot toward front-end consulting. Because site selection, utility availability, and environmental compliance dictate project viability, developers will pay premium rates for multidisciplinary advisory services before committing capital to architectural design or physical construction.
Grid Integration and Energy Innovation: The ravenous power appetite of modern data centers will force closer partnerships between tech giants, independent power producers (IPPs), and utility providers. Future data center projects will likely be co-located directly with dedicated power sources—ranging from small modular nuclear reactors (SMRs) to dedicated renewable energy microgrids—to bypass congested public transmission lines.
Regulatory Streamlining as an Economic Driver: As highlighted by industry leaders, capital allocation alone cannot stimulate growth if projects remain trapped in bureaucratic purgatory. Bipartisan momentum around permitting reform will likely intensify, creating a more predictable regulatory runway for critical digital and green infrastructure projects.
Cultural Shift Toward Risk Discipline: Major construction and engineering firms will continue shedding high-exposure, self-perform, and fixed-price design-build contracts in favor of fee-based professional services. This disciplined approach will permanently alter contractor-client relationships, placing a higher value on collaborative project delivery models and transparent risk-sharing frameworks.
Ultimately, the gold rush for digital infrastructure has matured. Success in the modern data center market no longer belongs to those with the deepest pockets alone, but to those who master the art of early-stage integration, cross-sector coordination, and rigorous risk management before a single shovel ever touches the dirt.
