The Cloud Data Center Construction Boom, in Two Charts
An estimate vendors and analysts often repeat is that about 80 percent of computing power running corporate applications still sits inside corporate data centers (as opposed to running in the cloud or in colocation data centers). Chasing that still enormous growth potential, cloud providers, from raw compute and storage to subscription-based software in the style of Salesforce or Office 365 have been pouring billions of dollars each quarter in both building and leasing data centers to host those services.
Data center leases, which hyperscale cloud giants like Amazon Web Services, Microsoft Azure, and Google Cloud Platform mention only in passing – and sometimes not at all – when talking about their infrastructure strategies are a crucial component of those strategies. Specialist data center developers can deliver a lot of new capacity quickly in a region where it’s most needed at a point in time. They can also alleviate the risk of investing in a massive construction project in a new market for a cloud provider when the provider is unsure how much demand they will see in that market in the future. They also secure land for data center construction in markets where appropriate plots are in short supply.
Two charts in a report published Wednesday by the commercial real estate giant Jones Lang LaSalle, which tracks supply and demand dynamics in the biggest data center leasing markets around the world, illustrate just how big a boom this race to expand data center capacity by cloud providers has been driving for those specialist developers, the likes of Digital Realty Trust, CyrusOne, and Global Switch.
It's hard to miss that the chart above also illustrates how oversize a role the Northern Virginia data center market is playing in this boom. Of the 775MW of capacity absorbed in the top markets last year (up 191MW, or 33 percent, from 2017), 270MW was leased in Northern Virginia, according to JLL. The second-highest rate of “absorption” was in London, where companies leased 69MW of data center capacity. Cloud providers accounted for 42 percent of the absorption in Northern Virginia: that’s 113MW, which is about 40 percent more than London’s entire absorption rate for the year.
The bigger story in data center markets across Europe, Middle East, and Africa, however, is that 70 percent of all data center capacity leased in those markets was leased by cloud providers, JLL said.
Since there are no signs of demand slowing down, data center developers continue building. JLL was tracking about 550MW in data center capacity under construction around the world as of the end of 2018, half of it in North America, 30 percent in EMEA, and the rest in the data center markets across Asia Pacific.
Industry: Data Centre News
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