Economy Watch: Data Centers Stay Red-Hot

Construction jumped 43 percent year-over-year during the first half, according to JLL, and big changes are in store during the next few years: artificial intelligence, automation and enhanced energy efficiency.

Digital Realty's expansion plans for its data center campus in Richardson, Texas, include 907 Security Row. (Image courtesy of Digital Realty/Alliance Architects)
Digital Realty’s expansion plans for its data center campus in Richardson, Texas, include 907 Security Row. (Image courtesy of Digital Realty/Alliance Architects)

Data center construction in North America was up 43 percent during the first half of 2017 compared with the same period in 2016, and industry consolidation powered a $10 billion surge in mergers and acquisitions during the first half of ’17, according to a recent report by JLL. Also, the report said, cloud leasing activity started shifting to global markets.

Data center users predict (according to the report) that the biggest industry changes over the next two years will include efficiency programs that install automation to make data center operations more valuable to the core business; artificial intelligence to reduce human intervention in data centers and cut time to restore operations in the event of a failure; and processor technology investments that will improve cooling and reduce energy usage.

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While data center users are looking to expand their global footprint, North America remains an important location for data storage, JLL said. The following markets experienced significant expansion during the first half of 2017:

Northern Virginia: Supply is growing at an historic rate, driven by its top-tier status in the data center industry. With a shortage of available big-block spaces, providers are busy bringing new inventory online.

Dallas/Fort Worth: During the first half of 2017, cloud providers officially set 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 earlier 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 longstanding operators and newer ones, the market sustained strong growth in 2016 and during the first half of 2017. Providers and users are now evaluating ways to enter the historically underserved market.