JLL: Shifting Clouds, Surging M&A Shape 2017 Data Center Demand

by Kristin Harlow

The data center industry is stepping up to meet escalating demand for storage, according to a new report from JLL, which reveals that data center construction in North America is up 43 percent in 2017 compared to 2016. In addition, industry consolidation powered a $10 billion surge in mergers and acquisitions (M&A) in the first half of 2017.

Data center users identified the biggest industry changes projected for the next two years in JLL’s report. Among the predictions:

  • Efficiency programs will install automation to make data center operations more valuable to the core business;
  • Artificial intelligence will help reduce human intervention in data centers and significantly cut time to restore operations in the event of a failure;
  • Artificial intelligence will make greater use of predictive analytics on-site;
  • Processor technology investments will improve cooling and reduce energy usage.

Data center markets across the country experienced significant shifts in the first half of 2017. Northern Virginia maintained its status as the top market in the data center industry, and supply is growing at a historic rate, according to JLL. However, a shortage of available big-block spaces is leaving providers scrambling to bring new inventory on line as quickly as possible to capitalize on the market’s low vacancy and pent-up user demand.

In the first half of 2017, cloud storage providers officially set up shop in Dallas/Fort Worth, driving a 50 percent bump in absorption. Low power costs will continue to be a major advantage for the market.

In northern California, leasing activity regressed to traditional market levels after large providers drove absorption in the region throughout 2016. Moving forward, construction and occupancy costs are expected to continue to decrease as large blocks of space open up for users.

Driven by continued success of both tenured operators and newer operators, the Atlanta market sustained its strong growth from 2016 during the first half of 2017. Providers and users are now evaluating ways to enter the historically underserved market as they look to anchor their presence in the Southeast.

For more insights on data center industry performance in the first half of 2017, read the report here.

— Kristin Hiller

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