Beyond the Jobsite: How External Pressures Create Risk on Data Center Projects

When Community Opposition, Resource Constraints, and Regulatory Pressure Become Project Risk

More than 1,500 new data centers are currently in development across the United States.¹ While most existing data centers are located in urban and suburban markets with established infrastructure, the next wave of development is moving into new territory. Today, 67% of planned data centers are being built in rural areas, and nearly 40% are being developed in counties that currently do not have a single operational data center.

These communities were never designed to absorb data center infrastructure growth at this scale or pace. As a result, opposition groups, zoning disputes, permitting delays, and environmental concerns are becoming more common as communities weigh the economic opportunity against the data center’s footprint. In fact, seven in 10 Americans oppose constructing data centers for AI in their local areas for reasons such as the effect on resources (water, energy, land), costs (utility bills, housing, cost of living), and pollution.²

These pressures do not stay external to the development project. Community and infrastructure strain can quickly become contractual, operational, and insurance-related exposure for design firms and project leaders.

How Community Pressure Becomes Project Risk

Community opposition rarely stays confined to public hearings or local debate. On hyperscale projects, it can quickly disrupt the project itself.

For example, in August 2025, a judge blocked the building of a data center in rural Prince William Country, Virginia, following a lawsuit brought by local homeowners.³ The ruling came on a project that had already invested significant time and resources in development. Similar disputes are emerging elsewhere throughout the country.

Impacts can show up in multiple ways:

• Permitting and zoning delays: Public opposition or environmental scrutiny can slow approvals, extend review periods, or trigger additional hearings and studies.
• Utility and infrastructure constraints: Power, water, and transportation infrastructure may not be able to support the existing or growing community and an energy-intensive data center simultaneously, delaying or totally derailing project timelines.
• Redesign and scope expansion: Municipalities, regulators, or utility providers may impose new requirements after planning is underway, forcing project teams to revisit design assumptions and project scope.
• Schedule compression: Delays tied to permitting or infrastructure can force project teams to accelerate later phases of work to recover lost time, increasing coordination challenges and operational pressure.
• Escalation costs: Extended timelines can increase labor, material, equipment, financing, and procurement costs, especially on projects already operating under tight supply chain conditions.
• Contractual disputes: Questions around who absorbs delays, redesign costs, liquidated damages, or infrastructure-related disruptions can become points of conflict between owners, contractors, municipalities, utilities, designers, and subcontractors.

The challenge for project teams is that many traditional contracts and insurance structures are designed around physical loss or operational failures within the project itself, such as property damage, injuries, construction defects, material delays, or testing failures. Therefore, community and environmental events often create major downstream financial consequences without triggering a claim or obvious insurance response.

Five Ways to Address Community Risk Through Contracts and Insurance

As these risks become more common, project teams need to evaluate how disruptions affect contractual obligations, insurance response, and overall project exposure before construction begins.

Consider these best practices to address external risk before it becomes a liability.

1. Include your broker, legal counsel, and risk partners from the start. Engaging risk advisors early gives you more time to identify coverage gaps, negotiate contractual protections, build contingency plans, and align insurance programs with the project’s delivery model and risk profile. Work with advisors with not only construction expertise but data center and hyperscale experience.
2. Structure insurance around the project’s exposure, not a standard construction template. Data center builds often require coordinated builder’s risk, delay in start-up (DSU), professional liability, environmental liability, transit, stock throughput, installation floater, testing and commission, and OCIP/CCIP structures that align with how external pressures could disrupt the project.
3. Clarify who absorbs delay-related costs. Contracts should address how permitting delays, environmental review, utility constraints, redesign requirements, and infrastructure-related disruptions affect schedule responsibility, escalation costs, acceleration efforts, and liquidated damages exposure. Many traditional agreements do not account for these types of external pressures.
4. Establish a process for community- or regulatory-driven scope changes. Project requirements often evolve as communities, regulators, utilities, and environmental agencies weigh in. Contracts should define whether resulting modifications constitute additional services, how redesign costs will be compensated, who approves scope changes, and how schedules and fees will be adjusted when project requirements change.
5. Review delay-related coverage assumptions. Don’t just assume insurance will respond to schedule disruption tied to permitting or infrastructure issues. Coverage may be limited. Builder’s risk and DSU structures should be evaluated carefully for utility-related exclusions, waiting periods, trigger requirements, and coverage limitations tied to regulatory or environmental delays. Work with your broker to address any gaps through revised contractual language, supplemental coverage, or contingency planning before delivery structures are locked in.

For more information on data center risk, download our latest guide.

[1] Pew Research Center “Most new data centers in the U.S. are coming to rural areas,” April 13, 2026.
[2] GALLUP “Americans Oppose AI Data Centers in Their Area,” May 13, 2026.
[3] NBC4 Washington Judge blocks data center project planned in Prince William County,” August 8, 2025.