JLL: Cloud Computing, AI Drive Data Center Growth

Mass adoption of cloud computing and artificial intelligence is driving exponential growth for data centers, reported JLL, Chicago.

“After the pandemic removed the four walls of the workplace, our new world of hybrid work has created an unprecedented need for digital technology,” said Andy Cvengros, Managing Director with JLL. “Employees are looking to their companies to create a seamless experience wherever they choose to work, requiring intelligent technology solutions to bridge the gap between the physical and the digital. As this reliance on digital technology increases, the data center industry is experiencing impressive growth and catching the eyes of investors and lenders as a strong, alternative asset class that has been relatively unimpacted by continued economic uncertainty.”

The JLL Global Data Center Outlook noted the need for more robust connectivity and innovative data storage is driving high investor demand. It forecasts the global co-location data center market size will grow 11.3% from 2021 to 2026.

The U.S. is seeing stronger appetite than other regions and accounts for 52% of all data center transactions from 2018 to 2022, JLL said. Additionally, the U.S. had 1,633 megawatts of data center absorption last year in the six largest U.S. data center markets–Chicago, Dallas-Fort Worth, New Jersey, northern California, northern Virginia and Phoenix. These markets have an additional 1,939 megawatts under construction.

As the demand for digital IT infrastructure continues to increase, “hyperscale” firms such as Google, Facebook and Amazon are poised to be the fastest-growing segments of the data center industry. JLL said it expects the hyperscale market to grow 20% from 2021 to 2026 as more major tech companies look to meet surging demand for data processing and storage requirements. With 314 new hyperscale sites in development around the world today, that number could surpass 1,000 by year-end 2024, up from less than 500 sites just five years ago.

“The goldrush of AI today is driving growth even further,” the report said. “Following the rapid development of AI tools such as ChatGPT, the potential of generative AI to transform industries in 2023 is expected to accelerate demand for computing power in data centers. With AI offering increased data usage and computing efficiency benefits, half of all cloud data centers are expected to use AI by 2025.”