Data center development is expanding into rural locations driven by lower land costs and access to renewable energy, requiring construction teams to address challenges around workforce availability. An inability to properly staff projects with a specialized & skilled labor force can harm project schedules and increase costs, with direct implications for Builders Risk insurance.
Workforce Availability: A Bottleneck for Construction
Unlike urban areas, rural regions often lack a deep pool of skilled trades, particularly those with the necessary skills for data center construction. This scarcity can result in delays mobilizing teams and may force contractors to bring in specialists from outside markets, impacting both costs and project sequencing.
Recruitment, Training, and Their Downstream Effects
Importing worker crews from other areas can lead to higher labor rates, travel, and accommodation costs. Developing local talent through training programs is possible but slow and can add weeks or months to project timelines. When critical skills are in short supply, specific data center tasks—like complex electrical work or cooling infrastructure installation—may take longer to complete.
Insurance Implications: Builders Risk Policy Considerations
For project owners and insurers, these staffing difficulties can directly affect Builders Risk coverage:
- Extended Construction Periods
Rural staffing shortages and project delays may push the construction completion date beyond the original timeline. Extensions to policy periods may be needed to adjust your builders risk coverage if timelines slip, potentially increasing premium costs or requiring underwriting approval.
- Heightened Delay-in-Completion Risk
Labor shortages can significantly extend the time required to restore a project to its planned schedule following a delay caused by an insured loss. Make sure your policy includes coverage for delays in project completion, which can be impacted by labor shortages.
- Increased Cost to Complete
Wage premiums, travel, and accommodations for outside labor can inflate the total insured value of the project. Adjustments to reported values may be needed, and cost overruns could push projects above declared coverage limits.
- Coverage for Temporary Works and Onsite Materials
With remote builds, more equipment and materials may be staged onsite for longer periods to accommodate workforce schedules. Project teams should confirm that their Builders Risk policy covers temporary works, stored materials, and any increased risk related to logistics, theft, or weather.
- Risk Assessment and Policy Terms
Insurers on data center projects will look carefully at rural projects’ labor plans, scheduling contingencies, and risk mitigation strategies. Poorly managed workforce risk can result in coverage limitations, higher deductibles, or restricted policy terms.
“Data center development is increasingly expanding into rural areas, driven by lower land costs and access to renewable energy sources. This trend introduces significant challenges for construction teams, particularly around workforce availability. Insufficient staffing in less populated regions can lead to project delays and cost overruns, creating direct implications for Builders Risk coverage.”
Daniel Kern, Vice President, Construction Property
Mitigating Staffing-Related Insurance Risks
Data center project owners need to communicate labor strategy and contingency planning to their insurer upfront, update timelines and values as actuals shift, and anticipate the need for policy extensions or delay coverage. Working with your carrier on proactive workforce management can help keep your projects on track throughout the extended lifecycle of data center construction.
