The rising reliance on digital content and data sovereignty laws are driving demand for data center space.
The ever-increasing demand for online content such as movies, videos, apps, and social media is spurring the adoption of cloud services to store all this content. This, in turn, is expected to double the size of the North American data center industry by 2021, according to JLL’s 2016 North America Data Center Outlook report.
“With information streaming in from every corner of the world, organizations struggle to understand where and how to best manage and process their data to deliver instant, reliable access to information for consumers and businesses alike,” says Bo Bond, Central Region lead for JLL’s Data Center Solutions Group. “Cloud services, digital content, and new data sovereignty laws are setting the data center market on fire,” he continues. “Demand is historically strong, so the onus is on the data center operators to build space fast enough, while also accommodating shorter, more flexible lease structures that have become highly popular as data strategies have evolved.”
2016 North America Data Center Outlook
Top 2016 Data Center Trends
From cloud adoption to data sovereignty, the data center industry is experiencing a host of new change drivers, all while it continues to explode with vigorous growth. We’re observing companies getting smarter about their data center and data usage strategies, thriving amidst these winds of change.
Data Center Markets - Atlanta
Corporate headquarters relocations and regional office expansions are contributing to the absorption of office and data center space, but more space and power is positioned to come online into 2017.
Data Center Markets - Austin & San Antonio
Supply of data center space will remain stable in this market, with demand coming primarily from the government and technology sectors.
Data Center Markets - Boston
Employment growth, GE’s relocation to Boston, and continued strength in tech and life sciences are all boosting Boston’s economy, ultimately benefiting data center space providers.
Data Center Markets - Chicago
Cloud demand will continue to outpace the supply of data center space in the Chicagoland area, although major providers are in the process of next-phase speculative builds.
Data Center Markets - Dallas
New supply of data center space is projected to be completed by the end of 2016, with demand coming mostly from financial services, insurance, and increasingly technology.
Data Center Markets - Denver & Colorado Springs
Companies looking for data center space are attracted to Denver’s technical talent and central U.S. location, offering interconnectivity to communications networks serving Chicago and San Francisco.
Data Center Markets - Houston
Even as oil and gas prices have dropped, demand is still coming out of the energy sector, which utilizes data-intensive applications to support drilling and exploration efforts.
Data Center Markets - Los Angeles
High power costs are keeping demand for data center space in the LA market flat. Large users with high MW needs will continue to source in markets with cheaper power and lower taxes.
Data Center Markets - New Jersey
The supply of data center space is running ahead of demand, giving users leverage until absorption increases. Demand within the tri-state area continues to be dominated by the financial services industry.
Data Center Markets - New York City
In the last 24 months, no new providers of data center space have entered the New York State/New York City market. Third-party colocation providers are taking a “just-in-time” approach.
Data Center Markets - Northern Virgina
With rich fiberoptic networks, low latency, and access to all cloud providers, Northern Virginia is a dominant expansion market for both new and existing third-party data center providers.
Data Center Markets - Northwest (Greater Seattle Area / Central Washington / Hillsboro, Oregon
Benefiting from sustainable power, data center supply is increasing in the Pacific Northwest, with demand dominated by the technology industry; a new influx of Asian corporations can be seen.
Data Center Markets - Phoenix
With short latency to California, but decreasing power and tax costs, Phoenix is seeing demand for data center space from end-users with regional requirements, and supply continues to increase.
Data Center Markets - San Francisco Bay Area
Low inventory levels and a lack of construction are edging up pricing in the Bay Area data center market. However, local tech companies, mobile apps, and cloud requirements are continuing to drive growth.
Data Center Markets - Greater Montreal Area
New data sovereignty laws and low-cost electricity are two of the drivers of demand in this area, where supply is increasing dramatically.
Data Center Markets - Greater Toronto Area (Including Barrie & Kitchener/Waterloo Region)
Many cloud-based providers are rapidly expanding within this market, where supply is currently stable. Plans for significant data center projects have been proposed but are not yet in the works.
Data Center Markets - Western Canada
Calgary’s supply of — and demand for — data center space is holding steady, despite oil market volatility. Vancouver’s supply is extremely limited, putting upward pressure on pricing.
Additionally, data sovereignty laws subject digital data to the laws or legal jurisdiction of the country in which the data is stored. According to the JLL report, countries around the globe are increasingly enacting such laws. Consequently, some of the data industry’s biggest players are quickly expanding globally to meet growing demand and regulatory compliance requirements.
The JLL report, which covers 17 North American markets for data center facilities, reveals the top trends influencing U.S. data center locations, as follows:
- Cloud adoption will double the size of the data center industry over the next five years.
- Data center users are disbursing data across locations, aligning with smarter data management strategies.
- Data sovereignty laws are redrawing the global data center location map.
- Climate change is shaping data center legislation and technology.
Cloud services will continue to be the primary demand driver in North America,” says Bond, “The industry’s biggest players are ready for it. They are upping their game with smarter capacity planning and virtualization strategies to meet the growing demand for this very specialized space.”