Data Center Construction Surges Thanks to Cloud Demand

By: Jeff Bertolucci| - Leave a comment

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As consumers increasingly turn to their smartphones for purchases and services, the need for cloud storage is soaring. And the data center industry is working feverishly to meet that demand.

According to a new study from the real estate firm JLL, data center construction in North America is up 43 percent in the first half of 2017 from the same period a year ago. Industry consolidation is picking up too, with a $10 billion surge in mergers and acquisitions in 2017. Cloud leasing activity is also expanding to global markets.

Filling the Space

The JLL report focuses on major trends such as enterprise hybrid cloud, security, consolidation and high-performance computing. The study found that while the rate of construction and merger-and-acquisition activity is advancing rapidly, absorption of data center space has returned to a normal pace in the U.S.

“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,” said Bo Bond, JLL managing director, in a statement. “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.”

Industry Changes Coming

According to the study, artificial intelligence, efficiency improvements and processor upgrades will enable enterprises to use their servers more efficiently.

  • AI will reduce human intervention, allow better use of predictive analytics and cut time to restore operations in the event of a failure.
  • Through automation efforts, efficiency programs will increase the value of operations to the company’s core businesses.
  • Investments in processor technology will improve cooling and reduce energy usage.

Although increasingly critical, security efforts can make data center strategy and implementation even more challenging, the study found. According to the report, an unnamed tech and big data company deployed additional racks for new security appliances as part of its growing network footprint. Extra security measures meant longer build times to bring the new systems online, adding complexity to capacity upgrades and planning.

Regional Markets Doing Well

North America remains a key market for data center expansion, with select tech hubs experiencing significant growth and unique challenges, including:

  • Northern Virginia: With a low vacancy rate and pent-up user demand, providers are striving to bring new inventory online as fast as possible.
  • Northern California: Leasing activity fell back to traditional levels in the first half of 2017. Moving forward, construction and occupancy costs will continue to drop as large blocks of space open up.
  • Dallas/Fort Worth: The first half of 2017 saw a 50 percent bump in absorption year over year. Lower power costs will help drive the market.
  • Atlanta: This city experienced strong growth from 2016 through mid-2017, marking a positive trend driven by established and new providers.
  • Montreal: This region is luring many top cloud providers drawn to the Canadian market’s optimal pricing and low power rates.

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About The Author

Jeff Bertolucci

News Writer

Jeff Bertolucci is a Los Angeles-based journalist specializing in technology, digital media, and education. His work has appeared in Kiplinger's Personal Finance, InformationWeek, PCWorld, Macworld, The Saturday Evening Post, The Los Angeles Times and many other publications.