With 10% growth over the same period last year, contracted floor space in multi-tenant data centers (MTDC) now totals 3.7 million square meters, with the biggest share of space found in London, Tokyo, the New York Metro area, and Virginia, according to a new report from IHS. Companies in these regions and across the globe continue to outsource their data center operations, causing both wholesale and retail colocation businesses to grow at very healthy rates.
While revenue (USD) also experienced a decent increase of nearly 5% in the first quarter, it was a bit slower than the usual double-digit growth seen the last few quarters. However, this was largely due to the weakening Euro vs. the dollar. In addition to revenue, which is subject to the ever-changing value of exchange rates, the IHS Intelligence Service covering the MTDC market also tracks space and customer power which is not affected by foreign currency moves.
IHS expects a continued growth of MTDC revenue, with a CAGR forecast of 8.2% through 2019 in constant dollars. Liz Cruz, who tracks the market for IHS, comments that “the growth comes from the expectation that companies will continue to look for ways to reduce capital expenditures required to build and maintain company-owned data centers. Businesses are increasingly choosing to outsource the operations to MTDC providers, thereby moving these expenses into the operational column. Also, the ability to add data center space on demand is appealing to all companies whose IT needs grow at speeds much faster than new data centers can be built, which usually takes about two years.”
While the outlook is optimistic, risks do still remain in the form of over-building MTDC facilities (reminiscent of the dot.com era) and the commoditization of service offerings. Multi-tenant data centers are working to differentiate and add value by focusing more on managed service offerings and the opportunity for interconnections between tenants.