In the rapidly evolving world of technology, the demand for data centers continues to surge. With the advent of artificial intelligence (AI), the need for customized, build-to-suit data center solutions has become more pronounced. This blog explores the current trends in data center development drawing insights from the latest North American and global data center reports.
Increased Demand:
In the next five years, consumers and businesses will generate twice as much data as all the data created over the past 10 years. In response, total storage capacity in data centers and endpoint devices will grow from 10.1 zettabytes (ZB) in 2023 to 21.0 ZB in 2027, for a five-year compound annual growth rate (CAGR) of 18.5%, according to Revelations in the Global StorageSphere 2023. This trend is expected to continue as AI and machine-to-machine learning gains momentum across various industries.
Global Data Center Outlook
The JLL Data Center Outlook Global 2024 report the data center market has experienced unprecedented growth. Key trends highlighted in primary markets are needs for higher power capacity while facing energy constraints. The need for resources, sustainability, and data sovereignty drives demand for localized data centers causing secondary markets growth.
- Power Growth: Structure Research estimates that global colocation MW will grow at 15.2% CAGR over the next five years. Most new data centers built 10 years ago had a critical IT load capacity of less than 10MW. Today, it is not uncommon to hear developers announce new builds of 100MW or more.
- Secondary markets typically have 100–600MW of supply and have recently become the focus of attention as investors, lenders and developers seek new opportunities in less crowded markets.
- Data Sovereignty: With increasing regulations around data privacy and sovereignty, companies are compelled to store data within specific geographic boundaries, driving the demand for localized data centers.
North American Data Center Trends
According to the CBRE North America Data Center Trends H2 2023 report, the need for lower latency and improved redundancy has led to data center developments in secondary and tertiary markets. Cities that were previously overlooked are now becoming attractive due to their strategic locations and available infrastructure.
- New Construction Growth: The largest hyperscalers’ new developments will complete construction and become operational in established, secondary and tertiary markets over the next few years—with AI requirements driving further demand. In 2023, there was a 46% year-over-year increase, an all-time high of 3,077.8 MW under construction in primary markets.
- Limited supply and strong demand: The overall vacancy rate for primary markets remains near a record low, at 3.7%. With few relocation options, most tenants are renewing existing leases rather than seeking new facilities.
Dallas-Fort Worth (DFW) Outlook: DFW is ranked second in primary data center inventory at 565.3 MW, but has only a 7.4% vacancy rate with an average asking rental rate change of 110.9 MW Y-o-Y % change.
Conclusion
The data center industry will continue to grow at a rapid pace in response to the evolving needs of businesses and the transformative impact of AI. As highlighted in the reports by CBRE and JLL, the need for future data centers will be shaped by geographic expansion, power availability, and secondary markets. For more insights on data center trends and developments, refer to the full reports by CBRE and JLL.