Should Colocation Facilities Prebuild Data Center Capacity?

Demand for data center capacity is at an all-time high, and there is no sign that it will slow down any time soon. In fact, by November 2020, data center tenants had leased or preleased a record-breaking 500 megawatts of capacity, which far exceeds the capacity demand from the previous data center construction frenzy in 2018.

Current data center inventory in the major markets can’t keep up with demand, which is causing a construction boom in both primary and secondary markets. However, supply chain disruptions are affecting how quickly new colocation facilities can be built and the speed at which existing facilities can be scaled up to meet tenant needs.

The current level of uncertainty regarding the availability of key components and construction materials is a good reason for colocation data center owners to take a highly strategic approach to determining capacity requirements in new and expanded facilities. This includes the critical decision of whether or not to prebuild capacity.

How much capacity is enough?

Whether you’re building a new colocation facility or adding on to an existing one, at some point early in the process, you will have to decide how much capacity the data center will initially be able to support. 

Too little capacity and you immediately limit the facility’s revenue-generating potential and increase the risk of downtime. Too much capacity and you incur the expense of maintaining unused space and resources.

How much capacity your colocation facility needs will depend on several factors, including the compute needs of your existing tenants, whether the facility is located in a hot spot or an edge market, and how quickly you expect to add more tenants or expand the footprint of existing ones. None of these factors is static or guaranteed, which makes capacity planning extremely difficult in such an active market.

What’s a better option for keeping up with capacity demand?

Today’s rapidly growing demand for data storage, management, processing and distribution makes it impossible to accurately estimate the right amount of capacity to build in at the start. To avoid making a costly mistake—by either over -- or underestimating your future capacity needs—modular data center design and its ease of scalability is becoming a popular choice for colocation data center construction.

Modular data centers are designed from the start to easily adapt to the changing needs of owners and tenants. Data center owners can easily add on to an existing enclosure to expand the floor space and the supporting infrastructure needed to accommodate growth. It’s also possible to scale back the operation and dismantle unneeded structures if the surge in demand begins to wane. 

Prebuilding capacity provides a high level of flexibility because the equipment can be assembled, configured, wired and ready to go upon delivery. Prebuilding capacity also allows data center owners to more easily accommodate tenants’ need to reach their customers at the edge of the network. 

When data center capacity isn’t restricted, data center owners can place colocation facilities in secondary edge markets and offer that space to new and existing tenants. This helps to optimize performance and reduce latency issues for their customers who utilize edge technology.

How can you plan for the future?

Traditional stick-built data center construction doesn’t allow much room for growth and flexibility, which is a major disadvantage in today’s booming data center market. Modular colocation data centers, on the other hand, can be manufactured with the future in mind and configured in a way that supports increased capacity seamlessly. 

Opting for modular construction means data centers are built in a controlled environment to the client’s exact specifications. This not only allows colocation facilities to be manufactured in a fraction of the time, but it also means additional units can be premade, delivered to the site and be ready to go online at any time, to meet capacity demand.

Data experts at IDC predict that the amount of data created over the next three years will be more than all the data created over the past 30 years. And all of that data has to be stored, processed, managed, secured and distributed somewhere.

The skyrocketing rate of data creation has launched a wave of data center construction and expansion, but it has also caused colocation facility owners to take a long, hard look at their capacity planning strategies.

Prebuilt capacity can help owners keep pace with the volume of data being generated by facilitating fast capacity expansion to meet their tenants’ need for scalable, affordable, reliable capacity and computing.

To learn more about where data center construction and technology are heading, download PCX’s expert Analysis: Key Takeaways from CBRE's 2021 Data Center Predictions and the Impact on Colocation.