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Navigating an evolving risk landscape in data center real estate

EY Americas
EY Americas

Multidisciplinary professional services organization

5 minute read 02 Jun 2026

In a highly dynamic market, here’s our take on the top five enterprise risks faced in data center real estate.

In brief
  • The developers, operators and investors of data center real estate face an evolving risk landscape.
  • Power constraints, cybersecurity threats and supply chain disruptions are top risks to business operations, growth and scale.
  • Data center companies and their investors must take a holistic view of the risk agenda to protect the enterprise.

Data centers form the critical backbone of the digital economy, powering everything from artificial intelligence (AI), to cloud computing to online transactions. As demand for data storage and processing continues to surge, so do the risks facing data center owners, operators, investors and developers. To thrive in this dynamic industry, data center companies must navigate a complex set of enterprise challenges. This article explores the top five risks for data center companies — access to power, cybersecurity, supply chain, development and construction, and customer concentration and churn — offering a summary of each risk, recent developments and strategic next steps for consideration.

Top five data center risks

1. Access to power

How EY can help

Data centers are energy-intensive real estate properties, making reliable, affordable access to electricity critical. As global demand for both data services and renewable energy rises, power availability has become a limiting factor for expansion. Risks include power outages, power supply fluctuations and dependence on external power sources. Any disruption can lead to downtime and impact service delivery.

 

In several major markets, grid constraints and competition for renewable energy have led to delays in new data center projects. Entering newer markets requires negotiations with the local utilities and policymakers to establish power supply. Additionally, energy prices have become increasingly volatile due to geopolitical events and the transition away from fossil fuels.

 

As data centers face increasing scrutiny over energy consumption, setting and transparently reporting on sustainability goals has become essential for operators, developers and investors. In addition to securing reliable, affordable electricity, organizations are expected to demonstrate progress toward environmental targets — such as carbon neutrality, renewable energy sourcing and energy efficiency.

Next steps to consider:

  • Invest in on-site renewable energy generation and energy storage solutions.
  • Engage early with local utilities and policymakers on grid planning and capacity upgrades.
  • Explore energy efficiency technologies to reduce overall consumption.
  • Establish measurable goals for renewable energy use, carbon emissions reduction and energy efficiency.
  • Develop and communicate a sustainability roadmap with clear milestones.

2. Cybersecurity threats

Data centers are prime targets for cyberattacks, given the sensitive information they house and the critical services they deliver. Threats include ransomware, data breaches and attacks on operational technology. Protecting sensitive data and maintaining the integrity of systems is critical to prevent financial losses and reputational damage.

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The past year has seen a rise in sophisticated attacks targeting supply chains and exploiting vulnerabilities in remote management tools. Regulatory scrutiny is also intensifying, with stricter requirements for data protection and reporting breaches.

 

Unfortunately, the catalyst for building a strong cyber program is often the result of an attack or breach. Many organizations only prioritize and invest in robust cybersecurity measures after experiencing a significant incident, which can expose vulnerabilities and lead to costly remediation efforts.

 

Cyber events bring increased public attention to the company and can cause substantial reputation damage. Beyond financial losses, a breach often results in heightened media scrutiny, loss of customer trust and long-term impacts on brand value.

Next steps to consider:

  • Adopt a zero trust security architecture and regular penetration testing.
  • Enhance employee training and incident response planning.
  • Collaborate with industry peers to share threat intelligence and leading practices.

3. Supply chain risks

Data center development and operation rely on complex global supply chains for equipment and critical materials. Disruptions can cause delays, cost escalations and project cancellations. Ongoing geopolitical tensions, trade restrictions and pandemic aftereffects have exposed vulnerabilities in the supply of servers, networking gear and cooling systems. Lead times have increased, and component shortages persist.

This risk started to get more attention during the pandemic, when supply chain delays and access to equipment became especially pronounced. Companies faced longer lead times and unpredictable delivery schedules, which highlighted the need for more resilient supply chain strategies.

More recently, tariffs and cost volatility have further complicated procurement, driving up prices and increasing volatility in equipment and materials costs. Many organizations have had to review their vendor relationships and sourcing strategies to manage these risks.

To address these challenges, some data center developers have shifted from a just-in-time procurement strategy to prepurchasing inventory. While this approach can help mitigate delays, it introduces new complexities in inventory management, logistics and process controls. Companies must now coordinate storage, transportation and installation of fixed assets, requiring robust inventory management processes and controls.

Next steps to consider:

  • Diversify suppliers and build strategic inventory reserves for critical components.
  • Work with partners to improve supply chain transparency and resilience.
  • Consider nearshoring or onshoring manufacturing where feasible.

4. Development and construction risks

The pace of data center expansion is constrained by rising land and construction costs, regulatory hurdles, and shortages of skilled labor and specialized contractors. Permitting processes have become more complex, especially regarding environmental impacts and water usage. Inflation and competition for construction resources have led to higher project costs and longer timelines. Delays in construction can result in substantial financial penalties, especially when working with hyperscale partners who enforce strict milestone dates. Data center developers must balance these factors while demonstrating that the infrastructure meets the required specifications and standards.

Increasingly, data center projects face opposition from local communities. Concerns may include environmental impact, water usage, noise and visual disruption. Proactive engagement and transparent communication with stakeholders can help address these concerns and build community support.

Early and ongoing collaboration with local governments and regulatory bodies is essential. Building relationships, understanding local priorities and aligning project goals with community benefits can streamline permitting and approvals, reducing delays and fostering goodwill.

Next steps to consider:

  • Engage with local communities and regulators early to streamline permitting.
  • Adopt modular and prefabricated construction techniques to reduce timelines.
  • Invest in workforce development and partnerships with vocational training programs.
  • Consider leveraging advanced project management tools to monitor progress and proactively address risks.

5. Customer concentration and churn

Many data center companies rely heavily on a small number of large customers, primarily hyperscalers and cloud providers. This concentration exposes operators to the risk of sudden revenue loss if a major customer leaves. Some hyperscalers are building their own facilities or negotiating more aggressive contract terms. At the same time, competition is intensifying among colocation providers, increasing the risk of customer churn.

To address these challenges and capitalize on hyperscale demand, data center companies are increasingly partnering with private equity firms and entering joint ventures. These partnerships offer access to additional capital, operational expertise and strategic flexibility, enabling companies to scale rapidly and pursue new market opportunities. Joint ventures can also serve as vehicles for growth in emerging markets, allowing operators to share risk, leverage local knowledge and accelerate development timelines.

By diversifying the customer base and leveraging strategic partnerships, data center companies can build resilience against customer concentration risks and position themselves for sustainable growth in a competitive landscape.

Next steps to consider:

  • Diversify the customer base by targeting emerging segments and smaller enterprises.
  • Develop value-added services to increase customer stickiness.
  • Monitor customer satisfaction and proactively address retention risks.
  • Consider strategic partnerships with private equity firms and joint ventures for sustainable growth.

On the horizon: Public sentiment and community engagement

As data center development accelerates, public sentiment and community engagement are emerging as critical considerations for data center operators, developers and investors. While data centers are often viewed as essential digital infrastructure, local communities are increasingly scrutinizing their physical and environmental footprint. Concerns around energy consumption, water usage, energy grid strain, noise pollution and land use can quickly translate into political pressure, permitting delays and reputational risk if not proactively addressed.

Next steps to consider:

  • Embed community engagement into early site strategy, alongside power and land feasibility.
  • Align sustainability commitments with local community priorities around energy, water and grid resilience.
  • Develop a consistent communication strategy focused on community value.
  • Monitor public sentiment and regulatory signals as early indicators of delivery and value risk.

Managing a rapidly evolving risk landscape

The data center world is at a crossroads, facing unprecedented risks but also significant opportunities for those who act decisively. By holistically managing the enterprise risk agenda, data center operations, developers and investors can build resilience and sustain growth in a rapidly evolving digital landscape.

Summary

Data centers are vital to the digital economy but face significant risks in 2026, including power access challenges, cybersecurity threats, supply chain disruptions, construction delays, and customer concentration. Rising energy demands and sustainability pressures complicate power reliability, while cyberattacks and regulatory scrutiny increase security risks. Supply chain volatility and escalating construction costs impact project timelines and budgets. Heavy reliance on a few large customers raises revenue risks amid growing competition. To thrive, data center companies must adopt strategic measures such as investing in renewable energy, enhancing cybersecurity, diversifying suppliers and customers, engaging communities, and forming strategic partnerships for sustainable growth.

The following people contributed to this article.

  • Kirk Anderson, EY Americas Real Estate Data Center Coordinating Partner
  • Elizabeth Logan, Principal, Consulting, Ernst & Young LLP
  • Emily Straten, Senior Manager, Consulting, Ernst & Young LLP

About this article

EY Americas
EY Americas
Multidisciplinary professional services organization
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Real Estate
Wealth & Asset Management

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