North America Data Center Report

The quest for power moves development into new frontiers

February 28, 2024
  • Kari Beets
What’s not going to change in the next 10 years?

Data will be fundamentally important to our society. Despite 2023 being a strong year for demand, limited supply shifted the balance of power even further to providers. In the second half of 2023 the primary North American data center markets saw accelerating demand combined with lack of power availability which led to extremely limited availability and increased preleasing.

What’s driving demand?

New demand from Generative AI requires tremendous amounts of power, with some up to 300-500 MW. Cloud and hyperscale demand continues to dominate in the larger markets, making it more difficult for smaller enterprise users to find colocation space and power to meet their needs. Proximity to interconnection points is driving site selection for data center demand, but these edge deployments tend to be smaller. Both users and operators must plan further ahead and commit to space and talent on accelerated timelines.

Financing is steady, but expertise is needed

Given uncertainty of occupancy for office product, slowdown in the logistics sector, and a decline in rental rate growth for living, alternative investment segments such as data centers are seeing increasing interest. Data centers are seeing increasing investor allocations – with the sector having a 9% CAGR in transactions since 2013 – the highest of any sector other than life sciences.

Companies with backing from investors are expanding rapidly but do not always have the framework for people and processes to run these data centers. These companies are turning to facilities and property management experts with a deep bench of engineers trained for critical environments.

Looking ahead

With the power shifts in the sector, previously unconsidered markets are entering the spotlight for new data center development. We profile these up-and-comers in addition to the primary and secondary North America data center markets.

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