Developer Launches Strategy To Build Modular Workforce Housing Near Big Data Center Projects

Developers like Target Hospitality that once provided workforce housing for oil and gas boomtowns are now shifting their attention to data centers as artificial intelligence megacampuses drive digital boomtowns in rural communities across the U.S.

For years, the Texas-based developer has built its business model around the boom-and-bust cycles of the oil and gas and mining sectors. One of the country's largest developers of temporary workforce housing, the company builds and manages modular communities for crews building pipelines or working oil fields and mining sites in rural regions.

These developments — effectively self-contained towns in which Target provides everything from food service to laundry and security — are designed and financed to scale up as natural resource extraction drives a regional bonanza, then scale down as those resources are depleted or become unprofitable. 

Now, Target is one of a growing number of workforce housing developers historically tied to resource extraction that see opportunity in the AI gold rush.

The firm late last month launched Target Hyper/Scale, a subsidiary devoted to providing temporary workforce housing solutions for data centers and supporting infrastructure projects.

Target Hospitality inked an initial contract to build a community that could eventually support 1,500 workers for an undisclosed hyperscaler for a site in the Southwest. As with projects in oil and gas boomtowns, the $83M deal is structured around the short-term nature of the project’s labor needs and uncertainty around future demand. The initial contract term is just two years, with extension options through 2032. 

The project is also designed to be scaled according to the customer’s needs. Initially built with 250 beds, Target announced Tuesday that 400 additional beds will be added by 2027, with the customer exercising an expansion option. 

“It is a little bit different of a customer than the oil and gas or your industrial customer or your mining customer. They've just never done this,” Target Hospitality CEO Brad Archer said on a quarterly earnings call this month. “Their goal is to get this done on time, so they don't mind spending the money getting the rooms close to location.”

Amid skyrocketing data center construction, the industry is grappling with a severe shortage of skilled construction labor. This crisis is compounded by the trend of building increasingly massive megacampuses in remote areas.

Developers and contractors are now forced to bring hundreds or even thousands of specialized workers from across the nation to these distant locations, which frequently lack the necessary housing or infrastructure to support such a massive influx of personnel.

This scarcity of skilled workers has emerged as one of the biggest constraints on Big Tech’s AI ambitions. 

Building data centers requires a range of workers with specialized skill sets, and builders are in desperate need of qualified electricians, mechanical technicians, pipefitters and others with knowledge of data center systems. At the same time, contractors need construction management professionals like superintendents and project managers with the qualifications and experience to work on data centers and other mission-critical projects.

Data centers may provide relatively few permanent jobs, but the scale of the labor force needed during construction is enormous as developers rush to get campuses done as fast as possible. In Mississippi, where Amazon is spending more than $20B developing new data centers, one contractor told Bisnow earlier this month that a single project in development has close to 3,000 workers on-site.

As a result of this labor pinch, the biggest data center projects are being built by a largely itinerant workforce that moves from one major development to the next. PointOne Data Centers Vice President Dan Ephraim said this dynamic makes the national labor market a zero-sum game. A major project in Tennessee is taking labor from other major projects across the country, he said.

“Four hundred journeymen — 400 people with suitcases — are building it out,” Ephraim said at Bisnow’s DICE: Connectivity event last month. “They took 400 people who could be working in Virginia. They took 400 people that could be working in Abilene. We're all competing for the same labor right now.”

While dire labor problems persist in established industry hubs like Phoenix, the issue has been exacerbated as large-scale AI megacampuses are increasingly sited in rural areas. Some of the largest data center projects in history are being built in places like Abilene, Texas, Holly Ridge, Louisiana, the Texas Panhandle and North Dakota.

And all those workers need to live somewhere, an opportunity oil and gas workforce housing firms have jumped at. 

Beyond Target Hospitality, others jumping on this trend are Civeo and Corporate Mobile Housing. The companies partnered with a national contractor to develop, construct and operate a 31-acre workforce lodging village designed to support the contractor employees working on Meta’s massive Hyperion data center project in rural Holly Ridge.

And DataCenterPads is providing housing near OpenAI and Oracle’s Stargate data center in Abilene, Texas, along with transportation systems to and from the site. 

It is a market that Target’s leadership expects will continue to grow in the months ahead as the rush for data centers and supporting power infrastructure continues. 

“The unprecedented capital spend in this industry, just across the U.S. and not just Texas, we feel requires a more focused and dedicated approach,” Archer said. “Not only are we dealing with the data center piece, we're dealing with the power piece as well, which just adds more of a need for rooms.”