Property owners and investors are betting big on data centres, but utility and infrastructure risks could quietly erode the success of these projects if left unaddressed.
As data centres continue their transformation from a niche asset class to institutional investor favourite, the conversation has rightly shifted from hype to fundamentals. Including uptime, energy efficiency, and long-term resilience.
But while much attention is paid to cybersecurity and energy sourcing, another critical risk is often hiding in plain sight: the infrastructure that keeps a data centre running is rarely fully within your control.
From shared utility corridors to offsite substations and fibre exchanges, these dependencies introduce a web of operational, legal and insurability challenges that can catch even seasoned developers off guard.
Most data centre stakeholders are across the need for dual power feeds.
But fewer understand that both power feeds might travel through the same conduit, across the same easement, or be supplied via a single point-of-failure substation kilometres away.
Scenario example:
A developer commissions a Tier III facility with dual power feeds.
On paper, the system is resilient. But a major civil works project severs the underground conduit that carries both feeds along a shared route.
Result: complete outage, and a lengthy insurance negotiation.
Insurers are increasingly scrutinising not just what’s on site, but how and from where critical services are delivered.
We’re seeing greater focus on:
Single points of failure in offsite electricity, water or cooling infrastructure
Uninsurable third-party infrastructure with unclear ownership or maintenance regimes
Inadequate documentation or mapping of critical utility routes.
This scrutiny affects insurability, pricing, and the ability to secure adequate business interruption (BI) coverage.
If there’s uncertainty around infrastructure resilience, some insurers will:
Apply exclusions or sub-limits for BI triggered by utility failure
Decline cover altogether for certain high-risk sites
Require independent infrastructure resilience assessments.
It’s not just about insurability. Hidden infrastructure risks can impact the success and longevity of a data centre project.
Exit hurdles: Investors undertaking due diligence may flag utility dependencies as red flags
Tenant hesitancy: Hyperscalers and enterprise tenants increasingly request resilience audits, SLAs with utility providers, and redundancy certifications
Cost creep: Retrofitting true route separation or infrastructure upgrades mid-project can be materially expensive.
Sophisticated property groups are embedding infrastructure risk assessments early in site selection and design processes, such as:
Independent utility route audits
Negotiating custom SLAs with offsite utility providers
Designing in physical and geographical separation for power and fibre
Engaging with insurers during design to validate insurability.
As competition in the data centre space intensifies, the difference between a Tier III facility on paper and a truly resilient asset comes down to the infrastructure.
Property owners and developers who proactively address offsite utility risks are often better placed to secure tenants, insurance, and long-term value.
At Lockton, we work closely with developers, investors, and insurers to identify and help manage the full spectrum of risks, both visible and hidden, across the data centre lifecycle.
If you're planning or investing in a data centre, talk to us about how we can help future-proof your project from the ground and the grid up.
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Phil Clauzel
National manager
Lockton Real Estate and Construction
+61 403 263 168
The contents of this publication are provided for general information only. Lockton arranges the insurance and is not the insurer. While the content contributors have taken reasonable care in compiling the information presented, we do not warrant that the information is correct. The contents of this publication are not intended as a legal commentary or advice and should not be relied on in that way. It is not intended to be interpreted as advice on which you should rely and may not necessarily be suitable for you. You must obtain professional or specialist advice before taking, or refraining from, any action based on the content in this publication.
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