Shifting clouds: data centers go global and turn to artificial intelligence

According to the latest JLL Data Center Outlook, the shift to cloud computing is driving profound changes throughout the data center real estate industry.

By Mark Bauer,  Managing Director, JLL

Mark Bauer JLL

As more companies and consumers migrate to the cloud, their escalating data usage is inflating both the public and private clouds. In fact, according to the latest JLL Data Center Outlook, the shift to cloud computing is driving profound changes throughout the industry. Here are a few ways the data center industry is quickly shifting to a more global and automated business in 2017.

Shifting to global markets, data centers follow cloud users

In 2016, cloud demand drove incredible absorption. Today, large-scale cloud providers are looking overseas to fill out their global footprints. This shift in focus is driven in part by data sovereignty laws some countries are enacting, requiring data to be housed in data centers within its country of origin. Also driving demand overseas and in Canada: large-scale providers pushing toward worldwide reach to better serve client demand. Demand from enterprise and hybrid adopters of cloud capabilities are also spurring movement among big data center industry players looking to globalize their data center solutions.

International facilities also caught the eye of many medium and large-scale colocation providers looking to stay competitive. Industry analysts anticipate increased acquisitions of facilities and businesses in international Tier 1 markets in the second half of 2017 as industry leaders become more comfortable with foreign operations.

$10 billion is just the beginning for 2017 data center industry M&A

Several massive acquisitions and buyouts were announced within the industry in 2017, setting the pace for a record-breaking year. Halfway through 2017, the industry has already passed $10 billion in the value of mergers and acquisitions (M&A).

Canada’s data center market is hot

Coming off a wild year for leasing in 2016, the first half of 2017 depicted reserved absorption as users continued to work through capacity they picked up in 2016. Regardless, many markets showed significant activity, including Northern Virginia, Dallas-Fort Worth, Northern California, Atlanta and Montreal. JLL’s report includes detailed market reports for these and other North American markets.

Canadian market activity was particularly strong in the first half of 2017, capturing 34.7 MW of absorption—nearly 10 MW more than in the first half of 2016. Activity was focused in the Greater Toronto Area and Montreal, as big-name cloud providers swooped into Montreal in the first half of 2017. Driven by optimal pricing, timing and power rates in the Canadian market, cloud activity and market deals propelled absorption to more than double its levels in the first half of 2016.

Where users will invest next: AI, cybersecurity, going global

According to the panel of heavyweight data center users interviewed for JLL’s report, top-of-mind issues include the growing need for data security, the use of artificial intelligence and globalization. One user from a company that handles financial data noted, “Security is a growing concern and top priority. When looking to expand our presence, we need to ensure that business, regulatory and compliance needs are met. We are focused on having a consistent and standardized security posture across all data center locations, as well as proactive framework-level security controls and automated security operations [e.g. patching, vulnerability scanning, product/app testing]. We also continue to conduct regular physical and logical vulnerabilities and penetration testing.”