Economy Watch: Robust Demand for U.S. Data Centers

More data center capacity is scheduled for delivery in 2016 than in each of the past several years, according to a recent CBRE report.

Data centers had a good year in 2016, and they continue to be a strong asset class, according to a recent report by CBRE on the property segment. One reason for its robustness is that hyperscale cloud service providers have lately formed one of the main drivers of data center space absorption.

Enterprise-driven requirements are generally shrinking, and end users ar

Source: CBRE U.S. Data Center Trends Report Q4 2016
Source: CBRE U.S. Data Center Trends Report Q4 2016

e becoming more sophisticated at scaling or right-sizing their IT needs. Thus, end users are incorporating cloud solutions that reduce their need for traditional space and power-based co-location requirements, the report said.

Looking ahead, more speculative data center capacity is scheduled for delivery in 2017 than in each of the past several years. The increase in capacity should facilitate increased leasing activity in supply-constrained markets.

Also, wholesale growth should continue to be robust for the sector, but demand could vary given the way technology has shifted business needs. Data center owners are more focused than ever on ways to monetize under-utilized assets and capitalize on market opportunities for their legacy assets, according to CBRE.