The data centre industry has exploded with vigorous growth; according to industry analyst IDC, the total number of data centres around the world will peak at 8.6 million in 2017. While “Data Center Outlook 2016” reports that this year data centre stocks surged 19% in Q1, and averaged 50% in Q2 and shows that globally, North America remains the most competitive market, representing 44% of the total market share.
Driving this growth is the explosion of data. According to IDC, the digital universe is doubling in size every two years. It means data centre providers need to be able to hander the sheer volume, accessibility and requirements for its storage and transport, but this is placing huge pressure on the infrastructure and resources, as well as decisions concerning location.
According to the “Data Centre Risk Index 2016”, when it comes to choosing a suitable location for a data centre, traditional drivers, such as cost and connectivity, are quickly being replaced by protection from natural disasters; a location’s coping capability ranked as the most important risk factors while political stability ranked second, collectively accounting for one third of overall decision making.
When ranked in order, the best place to locate your data centre was Iceland with an index score of 100%, followed by Norway (96.21%) and Switzerland (90.26%). In ninth place is the UK with a score of 79.81%, followed by North America (78.73%). These countries were deemed to offer politically stable environments for doing business, with low-risk of natural disasters and strong fundamentals in terms of energy security and share of renewable resources.
It’s clear that the data centre landscape is changing fast as leading providers and users strive to stay competitive amidst rapid regulatory, technological and environmental change. But what factors are driving the market?
Three key global challenges
Cloud adoption
In the open market, good quality space is being quickly absorbed, especially by the cloud providers. According to “Data Center Outlook 2016”, cloud adoption is expected to double the size of the industry over the next five years as technologies continue to advance. For cloud providers, the addition of managed services, presents a lucrative opportunity to generate interconnected revenue. As such, it’s expected that by the end of this year, cloud spending will reach $204bn, with 71% of enterprises adopting hybrid-cloud strategies.
Data sovereignty laws
Increasingly, countries are legislating that data must be housed in same country from which it’s accessed. As a result, the global data centre location map has been re-drawn, as some of the industry’s biggest players are expanding internationally faster to meet demand. Traditionally, data centre development activity has been most prevalent in the US, but thanks to new laws in countries like France, Russia and Brazil, all this is changing. Also, we’re yet to see the full impact of Brexit; three-quarters of British IT leaders say their data centres are located within Europe. Once the UK leaves the EU, most will need to re-locate their operations.
Climate change
Increasingly this is having a clear influence on many data centre strategies, shaping the way legislation is written, and spurring innovation to encourage the development of increasingly effective energy efficient solutions. When it comes to climate change, data centres seek to improve their ‘triple bottom line’, an accounting framework used to evaluate performance from a socially responsible, environmental and financial perspective. Thankfully, new technologies make this easier to achieve, for example:
– Cooling and powering strategies: advances in technology makes the cooling process less resource-intensive.
– Power proportionality methods: enabling more facilities to scale back their electricity consumption when not processing at full speed.
– Data centre microgrids: including Arizona’s 63MW development and Colorado’s 300MW development.
With such rapid evolution, everyone in the market is taking a fresh look at location decisions to capture market opportunities and leverage new technologies, while rising to the challenge of climate change. These decisions are based on five key inputs:
– Price
– Bandwidth
– Security
– Latency
– Availability
So how do North America’s major states stack up?
Shining a spotlight on the US
San Francisco Bay Area
With 424MW installed, 43MW planned and 18MW under construction, supply remains at historically low levels, despite the area being home to Silicon Valley. Local tech companies, mobile apps and cloud requirements continue to drive growth, but with available space at a premium, many companies are looking further afield to Santa Clara, which boasts some of the lowest power rates in California.
Atlanta
With 194MW installed, 13MW planned and 14MW under construction, there is a steady supply at present, but this is likely to change next year as more space and power becomes available. Besides technology companies, banking and finance are driving growth with the trend towards co-location facilities, as these organisations demand maximum flexibility.
Austin & San Antonio
With 403MW installed, 26.1MW planned and 9MW under construction, Austin remains stable while space in San Antonio is getting tight as its main player, CyrusOne, has leased nearly all its apace to a single technology tenant. Demand here is driven by the technology and governmental sectors, who are looking in particular for managed services and cloud growth.
Boston
With 135 MW installed, 8MW planned and 1.5MW under construction, supply remains static. This is largely due to the city having some of the highest utility rates in the country, a trend that’s set to continue. Demand here is mainly from local companies and institutions that are focused on life sciences, such as universities, who are creating greater volumes of data.
Chicago
With 502MW installed, 49MW planned and 27MW under construction, data centre spare is scare due to significant leasing by cloud users, attractive utility rates and power constraints. Demand here is driven by the banking and financial services sectors, however, with space limited, the focus is on ‘just in time’ compute to accommodate the explosive growth in cloud computing.
Dallas
With 403MW installed, 91MW planned and 17MW under construction, space is constrained with limited availability. Here the market is more diversified, with demand coming from financial services, insurance, healthcare and technology companies. Many providers are also investing more in adding power through sustainable sources, such as wind farms, to secure their future power supply.
Denver & Colorado Springs
With 113.8MW installed, 24MW planned and nothing under construction the market is static. Demand here is driven by end users with colocation requirements, looking to meet their disaster recovery needs. Denver is a particularly attractive location due to its workforce technical talent, low latency specifications and interconnectivity to communications networks serving Chicago and San Francisco.
Houston
With 119MW installed, 68.2MW planned and 1MW under construction, the market is slow. Demand is primarily driven by the energy sector, who is using high-specification technology and data-intensive applications to support drilling and exploration efforts.
Los Angeles
With 210MW installed, 3MW planned and 3MW under construction, demand is flat due to high power costs. However, there are signs of growth from smaller users, such as Chinese telecoms companies, who are starting to enter market in search of space. To encourage this growth and drive new business, many providers have offered promotions throughout 2016.
New Jersey
With 327MW installed, 115MW planned and nothing under construction, supply is actually ahead of demand. Although currently dominated by financial services, the market is showing signs of diversification thanks to the rise of social media, healthcare and smaller technology companies. As such, it’s currently a buyers’ market as providers compete to secure tenants.
New York City
With 166MW installed, 40MW planned and 4.8MW under construction, supply has stabilised, but there have been no new providers enter the market in last 24 months. Demand is flat and third-party colocation providers are taking a ‘just in time’ approach to wholesale market demand, which all means that companies can easily negotiate favourable terms.
Northern Virginia
With 773.6MW installed, 290.8MW planned and 103.1MW under construction, this is one of the most attractive and vibrant data centre markets globally. Demand driven by technology, insurance and telecoms companies, enterprises are drawn to rich fibre optic networks, low latency and access to cloud providers. Here, managed service and cloud offerings are strong with competitive pricing.
Future-tech: where experience meets innovation
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