As consumers turn to their smartphones for everything from streaming video to buying their groceries, the data center industry is stepping up to meet escalating demand for storage. A new report from JLL reveals data center construction in North America is up 43% from 2016 and industry consolidation powered a $10 billion surge in mergers and acquisitions (M&A) in the first half of 2017. Meanwhile, cloud leasing activity started shifting to global markets.
“While M&A activity is surging, leasing has quietly returned to normal in the U.S.,” said Bo Bond, managing director and data center solutions co-lead, JLL. “The acquisition of large amounts of server space in the U.S. by cloud companies continues, but is no longer as frenetic as it was in 2016. Data center users are now turning their attention toward filling out their global data center footprint and making technology investments to keep them ahead in a rapidly changing industry.”
Data center users investing in the futureIn exclusive interviews for JLL’s report, top data center users addressed the hot topics in the industry and how they affect their investment decisions. Users revealed the biggest industry changes coming over the next two years:
- Efficiency programs will install automation to make data center operations more valuable to the core business.
- Artificial intelligence will help reduce human intervention in data centers and significantly cut time to restore operations in the event of a failure.
- Artificial intelligence will make greater use of predictive analytics on-site.
- Processor technology investments will improve cooling and reduce energy usage.
“Data center users are investing in systems that will allow them to use their servers more efficiently and effectively,” said Mark Bauer, managing director and data center solutions market director, JLL. “Essential technological advancements like artificial intelligence to anticipate failures and automation to reduce response time are what the industry needs to keep up with today’s digital consumer.”
Surprising local market impacts
While data center users are looking to expand their global footprint, North America remains an important location for data storage. In fact, revenue and growth is up for data center companies in a big way in North America. The following markets experienced significant shifts in the first half of 2017:
- Northern Virginia: Supply is growing at a historic rate, driven by its top-tier status in the data center industry. But with a shortage of available big-block spaces, providers are scrambling to bring new inventory online as quickly as possible to capitalize on the market’s low vacancy and pent-up user demand.
- Dallas/Fort Worth: The first half of 2017 brought changes to the market, with cloud providers officially setting up shop, spurring a 50 percent bump in absorption. Low power costs will continue to be a major advantage for the market.
- Northern California: Leasing activity regressed to traditional market levels in the first half of 2017 after large providers drove absorption in the region throughout 2016. Moving forward, construction and occupancy costs will continue to decrease as large blocks of space open up for users.
- Atlanta: Driven by continued success of both tenured operators and newer operators hitting their stride, the market sustained its strong growth from 2016 during the first half of 2017. Providers and users are now evaluating ways to enter the historically underserved market as they look to anchor their presence in the Southeast.
- Montréal: Following the raging storm of U.S. cloud activity in 2016, big-name cloud providers swooped in to Montréal in the first half of 2017. The timing is right for providers to enter the Canadian market and take advantage of its optimal pricing and low power rates.
For more insights on data center industry performance in the first half of 2017, with research from data center hub markets across the U.S. and Canada, download the report.