The data center industry is booming right now thanks to a few key factors, including avid social media use, Internet of Things (IoT) driven technology, a large increase in remote workers and the growing popularity of XaaS (anything as a service) solutions. Each of these drivers generates massive amounts of data that then need to be stored, processed and secured.
Existing data centers can’t keep up with increasing capacity needs, leading to a high demand for colocation data centers and new facility construction. Although there is a growing market for data center services, meeting the need is not as simple as building the facility and waiting for tenants to arrive.
It’s not an accident that certain regions seem to have an abundance of data centers. Location is a big factor when planning a new facility. For example, the Pacific Northwest is popular, as is northern Virginia. But why?
In Washington and Oregon, it’s all about the climate. The proximity to water and cooler temperatures in this region makes cooling data centers far less energy-intensive than in warmer areas. In fact, free cooling in the Pacific Northwest is possible 80 percent of the year, significantly cutting energy consumption and the associated costs.
Northern Virginia is known as the “Silicon Valley of the East” for good reason. The area is a major hub for internet and network infrastructure, with a high concentration of fiber providing fast connectivity across the United States and into Europe.
In northern Virginia, data centers don’t benefit as much from the climate, but data center owners in this area have a lot of support from lawmakers and local businesses, including power companies. This allows them access to cheap power and tax incentives to build in the region.
Climate, perks and redundant fiber aren’t the only factors that make a location a good fit for a data center. An area’s population growth rate also raises its appeal. Latency is a major selling point for data centers, so the closer a business is to the facility, the better the performance. As more people and enterprises relocate to the Southeast, data center hosting in Atlanta, Dallas and other growing metropolitan areas is booming.
Thanks to the current surge in data-heavy applications and services, even much smaller markets such as Big Spring, Texas; North Sioux City, South Dakota; and Kearney, Nebraska; are seeing an increase in new data center construction. Growth is expected to increase in regions like these as more people move out of the urban core and more companies, such as Compute North, take advantage of the financial incentives of building outside of the main data center hubs.
Historically, Google. Microsoft and other big players centralized their data centers in the usual places, but as data drives demand for more capacity, both big and small operators are looking to alternative locations, such as Microsoft’s new data center region in Arizona and other secondary markets such as Boston, Minneapolis and Miami.
The main criteria for selecting a location for a new data center include obvious things such as proximity to people, a reliable power source and high-capacity network connections. But there are other factors to consider as well.
The availability of a strong infrastructure technology (IT) workforce and significant construction infrastructure, including materials and skilled workers, are critical factors in the site selection equation.
Building a data center in a region with minimal skilled construction labor and/or qualified IT professionals will have a huge impact not only on actually building the data center, but also on supporting the day-to-day operations of the facility.
Understanding risk factors, such as the potential for a natural disaster, is important when scouting new regions to build in. Some areas have a high propensity for natural disasters (e.g., California and its earthquakes or Florida and its hurricanes). But these are known risks, and data centers built in these regions are designed with these events in mind.
The bigger risk is building in a region where severe weather events are possible but unlikely, because there are fewer safeguards built in as standard protocol. Case in point, Hurricane Sandy’s impact on New York in 2012 and the severe winter storm that shut down Texas in 2021.
After all of the unexpected events of 2020, making predictions about the future of the industry is complicated. But it’s important to keep moving forward, even if we have to change course along the way.
Looking ahead to what’s next in data center market expansion, we can be fairly confident that a few things will be on the radar:
Data center expansion will continue for the foreseeable future, which will open new markets for data center construction projects. Business and population are growing in regions outside of the traditional data center hosting hubs, so secondary markets are poised to take center stage.
Some experts are predicting a busy year for data center M&A deals. Driven by the demand for more capacity, more speed and more efficiency, we will see industry leaders such as Digital Realty and Equinix acquiring smaller operations to expand services and move into new regions.
No conversation about data centers is complete without mentioning clean energy and sustainability. This is an area where modular data center construction will continue to gain ground, as it checks the box not only for minimizing environmental impacts, but also for fast deployment and scalability. These factors are in high demand in today’s highly competitive data center hosting marketplace, and will continue to shape the marketplace moving forward.
However, no one can say for certain which direction the data center market will go in the long term. But as of right now, business is booming and expansion is progressing rapidly. Download The State of the Data Center Industry in the New Decade to learn more about where we stand today and where the industry is heading post-COVID-19 and beyond.