Data Center Demand Continues to Soar Globally
- Mar 01, 2019
Boosted by increased cloud activity, data center demand continued to climb feverishly across the globe in 2019, and the loud call for space will likely persist unabated in 2019, according to JLL’s new Data Center Outlook report.
“Our industry’s growing global pipeline exemplifies increasing consumer demand around the world and the continued adoption of next-gen applications,” Bo Bond, managing director & Data Center Solutions co-lead at JLL, said in a prepared statement.
JLL examined three regions—the U.S. and Canada, Europe and Asia Pacific—and some of the findings exceeded expectations. Bond told Commercial Property Executive that the firm hadn’t anticipated the “vast amount of global cloud absorption with no end in sight for 2019.”
In the second half of 2018, the global data center sector recorded 775 MW of absorption, a year-over-year increase of 191.5 MW, with the U.S. and Canada accounting for an aggregate 509 MW. Northern Virginia held its position as the leading data center market, as robust demand pushed absorption to a total of 270 MW. London was a distant second with 69 MW of absorption, followed by Phoenix, Frankfurt and Dallas-Fort Worth, which saw 51, 46 and 40.2 MW of absorption respectively.
“Major cloud providers are leasing data center space at record rates from global and regional data center providers in order to meet customer demand,” added Bond. Of the 24 top markets JLL surveyed in North America, Europe and the Asia-Pacific region, only Boston logged negative absorption.
Adjusting the inventory
Developers in leading data center markets are rushing to ensure that supply will be able to accommodate the seemingly endless rise in demand. Presently, projects totaling 549.7 MW are underway, 265.7 MW of which are located in North America.
Digital Realty is adding to the construction pipeline around the world. The data center REIT plans to develop 8 million square feet in Northern Virginia on recently acquired land, and it’s increasing its offerings in Sydney with a series of phased expansions at its Digital Erskine Park campus. Equinix Inc. will provide another data center in Singapore with the opening of the $85 million SG4 in the fourth quarter of this year. The company is also building a $120 million flagship data center at its London Slough campus in London. CyrusOne announced it will open a new facility in both London and Frankfurt in 2019 and 2020, respectively. “European Markets are growing at an astounding rate from both supply and demand perspective with no visual headwinds,” Bond said.
2018 was yet another year of busy M&A activity in the data center sector. As noted in the JLL report, 68 such transactions valued at a total of $16 billion closed last year, with Digital Realty Trust and Brookfield Infrastructure’s $1.8 billion acquisition of operator Ascenty among them. And in perhaps the last major data center transaction of 2018, Brookfield Infrastructure completed the purchase of 31 centers from AT&T.
Another high-volume investment year is likely in store. Bond stated, “The asset class has led the REIT sector for the last couple years and I do believe it will continue due to global demand for enterprises and cloud providers.”
Image courtesy of JLL