Don’t blink—today’s data center landscape is changing fast, as leading providers and users strive to stay competitive amidst rapid change. With record-breaking activity in M&A and data center construction in North America up a whopping 43 percent in the first half of the year, 2017 promises to be an even wilder year for data center real estate.
In 2016, the overwhelmingly predominate absorption driver in the sector was cloud focused, leading to one of the hottest leasing years on record (which we dubbed, the ‘Great Absorption of 2016’). In 2017, cloud providers continue to be the leading demand generator, although activity is noticeably lighter than 2016.
So what does this all mean for our local market?
Phoenix is bucking one major national trend. Although absorption statistics across the nation have indicated a calming, Phoenix has seen a very similar rate of absorption as in 2016, with expectations to see more. Tech talent and tech companies are drawn to the sunny city for its incentives and low costs of business—forecasting an ongoing healthy demand. Current providers are moving quickly to develop additional product, and new providers have entered the landscape knowing that the market is well-positioned for cloud projects and swelling enterprise demand.
The industry’s incredible momentum is exposing new opportunities for all markets to evolve. JLL’s latest Data Center Outlook report sheds light on the top four trends driving change in the data center industry:
- The cloud—now headed to global markets: 2016 saw incredible absorption driven by cloud demand—today’s large-scale cloud providers are looking overseas to fill out their global footprint.
- M&A heavy hitters continue…to the tune of $10 billion. Several massive acquisitions and buyouts were announced within the industry in 2017—setting pace for a record-breaking year. We’re halfway through and already passing $10B.
- Absorption of data center capacity is normalizing—for now. Coming off a wild year for leasing, the first half of 2017 depicted reserved absorption as users continue to work through capacity they picked up in 2016.
- Data center users crave more power, deploy artificial intelligence (AI) and go global. JLL’s panel of data center heavyweights sound off—telling us about their growing need for data security and AI, and how it will affect their business going forward.
Keep your eyes to the skies! Shifting clouds bring great change on the horizon. To learn more about this topic, download JLL’s full Data Center Outlook report.
About the author
Mark Bauer is a Managing Director and Co-Leader with JLL’s global Data Center Solutions group that focuses on global representation providing real estate planning and execution of mission-critical data center relocations and expansions. With unmatched experience and knowledge in the growing multi-tenant data center environments (colocation and wholesale colocation), Mr. Bauer provides clients with strategic and tactical guidance and representation to meet investment, acquisition, leasing and development objectives.