Real Estate Grows in Step with Data Centers

You only need be a groundhog with its head planted firmly in the sand to not know that the data center industry is budding like springtime on steroids.

And as this global industry continues to outpace itself thanks to consumers’ desire for all things digital, expect to see more movement from private corporate servers to cloud-based ones. Driving the demand are such cloud service providers as Amazon Web Services, Google and IBM.

According to the National Real Estate Investor, of the 15 major data center markets it tracks in the U.S., nine saw at least 30 percent of user demand due to cloud computing.
North America leads the pack, accounting for more than 60 percent of the almost 400 megawatts of space currently being built internationally. The top markets for data centers include the U.S. real estate markets of Northern Virginia, Dallas, Northern California and Chicago. Further afield, Dublin, Montreal and Tokyo also posted increases as breakout markets in 2017.

To give you some sense of the growth, let’s look at Northern Virginia as an example. That’s where the rapid development of data centers is paving the way for the construction of more than 860,000 square feet of data-center space. In addition, in the same area, more than 1.25 million square feet of building projects for data centers are in the planning stages. Like Northern Virginia, Toronto and Montreal were also hotbeds of data-center construction activity in 2017.

As data centers continue to flourish, executives in the industry will look this year to improving energy efficiency and begin exploring cooler climates where the reduced demand for cooling drives down energy costs.

Operators will also strive to offer solid services that address customer location. The pressure to build stronger services for those who live and work outside of central markets will grow.

Given the bullishness of the data-center industry, expect it to attract billions of investment dollars as we move into 2018. Last year, it hit record levels as it approached nearly $20-billion in investment volume. Experts expect demand will induce it to surpass other income-earning real estate segments. It is anticipated that markets in Northern Virginia and Chicago willcontinue to do well this year in addition to those in North Carolina and Portland.

As long as consumers continue to increase demand for data consumption, storage and the ever-changing progression within the tech world, expect demand to drive investment in the industry. This year will see more mergers and acquisitions and more growth in primary and secondary data-center markets as consumer demand for speed breeds new and larger footprints in this sector.

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