Data center build-out creates new stress test for Georgia construction firms

The national survey found roughly 58% of respondents in the construction sector are seeing increased labor competition because of data center projects, and nearly half of respondents are feeling wage pressure to attract and retain workers. There were only a half-dozen Georgia respondents, and a third of them felt the same.

For years, many businesses have confronted a shortage of workers in the skilled trades as baby boomers retire and fewer people stand in the wings to replace them.

While companies involved with the data center build-out are experiencing rapid growth, the lack of skilled tradesmiths presents a ceiling to how quickly these projects can be built.

The labor strain could mean higher paychecks and more opportunity for skilled construction workers. But the scale and complexity of these projects, which are tasked with keeping computer servers online 24/7, also present a tough entry point for new workers to break into a construction industry desperate for more skilled labor but struggling with recruitment and retention, experts said.

“Those (data center construction) jobs are overwhelming to somebody like me who has been in the industry for 45 years,” said Boyd Worsham, president and CEO at the National Center for Construction Education and Research, which helped conduct the annual survey. “And we take young people who have never walked on a construction job in their life and put them on the biggest projects in our country.”

“Of course they’re going to be overwhelmed,” he added.

Credit: Miguel Martinez-Jimenez

Credit: Miguel Martinez-Jimenez

Georgia ended June as the busiest state for data center construction, according to data from real estate services firm CBRE. It was the first time Northern Virginia, the historic home of data centers, was dethroned as the region with the most computer server space being built.

Some elected leaders have touted data centers for their economic benefits. The complexes create many short-term construction jobs. Once open, the centers typically employ few people, but the ones employed are often highly paid. The main economic benefit is from property taxes.

Still, the state of Georgia heavily subsidizes data centers via sales tax exemptions that have become one of the state’s biggest incentives. Many communities also offer lucrative property tax breaks to recruit the centers.

Backlash, meanwhile, has continued to grow in communities across the state, with concerns raised over data centers’ power and water demands and the rapid expansion of the state’s power grid to serve them.

Data centers have become the backbone of new construction after the COVID-19 pandemic upended the office market and trade tensions shook the warehouse sector. About $75 billion of data center construction was underway across the country at the end of July, according to U.S. Census Bureau data first obtained by Axios.

Credit: Courtesy of Axios/U.S. Census Bureau

Credit: Courtesy of Axios/U.S. Census Bureau

Atlanta-based T5 Data Centers recently spun off its construction arm into its own company called EverOn. Tom Mertz, the new company’s CEO, said companies able to deliver the needs of data center construction projects are doing everything they can to rapidly expand.

“There’s only so many people who can do this,” he said.

It’s a point echoed by the Associated General Contractors of America, which lobbies on behalf of the construction industry. Its leaders said data centers are providing much-needed work, but America’s labor pool — which isn’t helped by increased immigration enforcement at construction sites — needs more investment.

“The need for people to work on new data centers is keeping labor conditions tight even as demand for many other types of projects remains relatively soft,” said Ken Simonson, the association’s chief economist. “Meanwhile, the nation is not producing enough qualified workers, even as federal immigration policies are impacting nearly one-third of firms.”

Nearly one in five survey respondents nationally said data center projects are creating competition for workers. Among 26 Georgia respondents, that figure was 12%. The survey results found that nationally about 42% of project delays were because of worker shortages, either in-house for contractors or among their subcontract networks.

Even so, data center-related companies are struggling to keep up with the new hiring demands.

Mindy Bates, human resources director for Valdosta-based Ace Electric, said her company provides electrician services for data center projects across four states, including Georgia.

“The scaling that we’ve had to do with hiring is just absolutely crazy. Just this year, we have netted over 500 employees,” she said. “To get that, you know, in construction, you don’t hire 500. You bring in about 700 (because of turnover).”

Credit: Miguel Martinez/AJC

Credit: Miguel Martinez/AJC

The quit rate among construction workers is among the highest of any industry, according to Bureau of Labor Statistics data, and is only rivaled by mining, trade and hospitality. The Association of General Contractors proposed more high school and trade school investment to prepare the next generation of specialized construction workers.

For data centers, Bates said electricians especially need upskilling because of the unique demands of these power-hungry projects.

“It’s all pulling wire. It’s still electric work,” she said, parroting what she’s heard from electricians. “But when they get in there, they’re like, ‘Oh my God!’ It’s completely different!”