Data Center Demand Grows Significantly

Michael Tucker mtucker@mba.org

September 05, 2018


The data center industry is well positioned to meet the significantly increased demand it is seeing, reported JLL, Chicago.

The firm's Data Center Outlook report said U.S and Canadian data center demand equaled 292.1 megawatts, up more than 30 percent year-over-year. Unlike most CRE sectors, data centers are benchmarked in megawatts consumed rather than in square feet. A megawatt powers 4,000 servers.

Research and Markets, Inc., Dublin, Ireland, predicted the data center market will grow at a 28.8 percent compound annual growth rate between 2016 and 2020.

JLL reported "substantial" data center construction pipelines, with 759.7 MW of new construction currently underway across the globe.

"Though the majority of new data center product is being developed in the U.S., the full scope of our industry's global pipeline is a testament to consumer demand increasing everywhere," said JLL Managing Director and Data Center Solutions Co-Lead Bo Bond.

JLL Managing Director and Data Center Solutions Co-Lead Mark Bauer said he sees no sign the appetite for data center and cloud space will abate any time soon.
Social media plays a "significant" role in booming data center development in northern Virginia, Bauer said. JLL tracked just under 100 MW of absorption that can be directly attributed to cloud providers ramping up there to meet growing demand. To the west, Austin and San Antonio, Texas and northern California saw the most activity by percentage of total absorption, driven by cloud providers' desire to remain close to their growing end-user base.

"We do not expect to see a slowdown in demand from cloud users in the near future, as end-users continue to migrate their IT needs to the cloud to save costs and for added flexibility," CBRE Senior Managing Director of Data Center Solutions Pat Lynch said.

JLL identified several other trends currently affecting the data center industry:
Data center real estate investment trusts are on the road to recovery. "Despite a difficult first few months [of 2018], recent stock activity signals a strong second half for data center REITs," JLL said. 

Also, data center contracts continue to modernize, driven by changing user needs. "Contracts are continually evolving as applications have been virtualized and cloud has become an enterprise strategy," JLL said. "The focus is shifting from just power and space to flexibility and portability to accommodate rapid technological changes in the sector."

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