Data Centers See Increased Investment

Cloud computing, AI and “5G” fifth-generation wireless technology are accelerating data center development and investment, reported Cushman & Wakefield, Chicago.

“Data centers, once a niche investment and inflexible asset for global enterprises, are now a cornerstone of the information economy, and $100 billion has poured into the asset class over the past decade,” Cushman’s Data Center Market Comparison said.

A major technological shift drives that huge capital inflow, the report noted. “Enterprises have chosen to move workloads off premises, first to colocation facilities and more recently to a mixture of colocation and public and private clouds,” Cushman said. “This shift has caused the largest cloud platform providers, Amazon, Google and Microsoft, to become the most influential players in many markets, altering data center sizing by a factor of 10. The 10-megawatt data center that was impressive 10 years ago now pales in comparison to 30-MW leases now signed with increasing regularity.”

Unlike most commercial real estate sectors, data centers are benchmarked in megawatts consumed rather than by square feet. A megawatt powers 4,000 servers.

Dave Fanning, Executive Managing Director and Leader of Cushman & Wakefield’s Data Center Advisory Group, said data center developers and operators require a parcel with robust fiber and access to power as well as a thorough grasp of the permitting process. “Investors must be able to assess the long-term potential of a data center to hold its value and how easily it can be upgraded,” he said. “All involved require access to capital and a clear understanding of objectives.”

Cushman evaluated 1,162 data centers across 38 global markets, focusing on cloud availability, fiber connectivity, market size, development pipelines, government incentives and market vacancies among other factors. It found the largest markets–northern Virginia, Silicon Valley, Dallas, Chicago and New York/New Jersey still dominate the data center landscape. But emerging markets including Atlanta, Denver, Las Vegas, Phoenix, Portland, Ore. and Salt Lake City offer compelling alternatives. Although the study’s three largest markets, northern Virginia, Silicon Valley and Dallas, scored considerably higher than fourth-ranked Chicago, the next 12 markets were separated by a final score of less than 10 percent. “This close placement represents a new shift toward key secondary areas fast becoming primary markets,” the report said.