Stressors like high inflation, rising interest rates, supply chain disruptions and a lack of skilled workers are causing many industries to lay off employees and cut back on new projects.
Even the data center industry is feeling the effects of these uncertain economic times, as evidenced by recent statements from Google and Meta announcing plans to postpone or stop the construction of several new data centers.
Despite the surprising news from these two technology giants and the thousands of end-of-year layoffs at Twitter, Amazon, Meta, Google, and other big tech companies, some in the construction industry say they expect new data center construction to continue at a steady—if not accelerated—pace in 2023.
According to Danny Horton, senior project manager of the data center division at PCL Construction’s Seattle office: “There is too much demand for these structures. And while the layoffs have hit the industry hard, new opportunities continue to arise, and we’ll keep seeing momentum and growth for years.”
It’s hard to predict which way the data center construction industry will go in the short term, but the world’s ever-increasing reliance on data isn’t going away. To keep pace with the demand for capacity, new data center construction is inevitable.
But how do data center owners decide where to build new facilities?
Due Diligence Is Critical When Selecting a Location for a New Data Center
In 2022, data center construction expanded into more secondary and edge markets as real estate in primary markets became more difficult to acquire and increasingly cost-prohibitive.
As a result, states and regions such as Utah, Ohio, the Pacific Northwest and the Southeast are becoming secondary hubs for new data center construction.
When narrowing down a search for data center real estate, owners look for locations that support specific outcomes, such as safety, redundancy, customer experience, access speed and physical accessibility.
To achieve these outcomes, data center owners must consider several logistic, infrastructure and environmental factors.
10 Factors to Consider When Selecting a Data Center Location
When considering new data center construction, 10 main elements contribute to a location’s fitness for use:
Abundant, accessible and affordable power is the No. 1 consideration when deciding where to construct a data center. The facility needs to be close to a reliable power grid with ample redundancy and backup technology.
Because data centers consume a huge amount of electricity, look for a location in which utilities are reasonably priced or costs are offset by energy from renewable resources. It’s also important to note that some major hubs, like Northern Virginia, are struggling to meet existing demand for power, which is preventing new facilities from being built in the region.
Renewable resources benefit more than a data center’s bottom line. A study from 2021 shows that data centers are responsible for 2 percent of the world’s CO2 emissions. As the industry tries to shift toward sustainability, owners can lower their environmental impact by building in regions in which renewable energy resources are available.
Aside from power supply, reliable network connectivity is the most critical factor to consider when selecting a data center location. The quality of a data center’s network connectivity significantly impacts clients’ access to data and the client experience, which is a major consideration when looking into secondary and tertiary markets.
Ideally, build near a major fiber intersection with access to dark fiber optic cable infrastructure to minimize latency or near a carrier hotel that will allow data center clients to optimize network access and availability across local and national carriers from one central hub.
Real Estate Costs and Availability
In early 2022, hyperscale operators scooped up much of the available real estate in primary markets, effectively shutting out smaller data center operators. This combination of low inventory and high costs is driving expansion into secondary markets with more (and less expensive) land and power readily available.
Data centers require educated, skilled professionals to support IT equipment and maintain the facility and infrastructure itself. Where you build will determine how easy—or difficult—it is to attract and retain employees with appropriate skill sets.
Taxes and Incentives
Remote and secondary markets are more likely to offer incentives and tax breaks to attract new data center construction projects. However, some larger markets are expanding their tax breaks and incentives to attract new data centers that will provide critical IT infrastructure in fast-growing regions, such as Seattle, WA.
Building in regions with a high potential for hurricanes, earthquakes, wildfires and other natural disasters puts your data and equipment at risk. These regions are often more expensive to build in due to added insurance and construction regulations, so they may not be worth the additional risk and expense.
Weather and climate can significantly impact your data center’s energy efficiency and operational costs. Building facilities in cool, low-humidity regions provides cooling technology options that aren’t feasible in other climates, which can ultimately lower energy costs, improve cooling efficiency and reduce environmental impact.
Remote locations may be less expensive, but they can also be difficult to reach. Before constructing a new facility, consider the logistics of building, maintaining and staffing a data center that isn’t easily accessible.
Political and Economic Stability
As data center owners consider expanding into global markets, selecting a location becomes even more complex. Owners must navigate the safety and security of the staff and data, local rules and regulations governing international businesses and the availability of resources to build and maintain a facility in a given region.
Where You Build a Data Center Is Just Part of the Equation
Finding the most resource-rich, cost-effective location for a new data center build is crucial, but that’s only the beginning. Subscribe to the PCX blog to learn more about modular data center construction and all the systems and components that go into a successful data center deployment.