Expect demand for data center facilities to grow in 2018, continuing the trend from 2017, predicts independent national commercial real estate valuation, assessment and advisory firm BBG. According to BBG, last year U.S. data center investment reached $20 billion, almost three times the level ($7.78 billion) of the prior year, and nearly five times the level ($4.7 billion) of seven years earlier.
We’ve reported on many transactions in the data center space already this year. Illustrative of this trend was Google’s announcement that it’s planning to launch or expand its data centers and office holdings in 14 states. Much of the Google expansion was aimed at supporting cloud development.
This is a trend that has been continuing for several years.
U.S. Data Center Investment
Data center absorption rates were high last year. At a total of 337.2 megawatts, the top 15 markets were within about 20 MW of the record year of 2016. Data center demand is typically measured in absorption rates instead of square footage.
The top areas for data center usage were northern Virginia (115.0 MW), Chicago (44.0 MW), Dallas/Fort Worth (43.0 MW), Phoenix (20.9 MW), Las Vegas/Reno (22.0 MW) and Austin/San Antonio (21.0).
BBG says data center demand continues to grow primarily as a result of the growth in cloud computing. Global IT spending is expected to grow to $2.3 trillion by 2020, according to a Statista report.
“We anticipate a robust data center market in the foreseeable future, driven by the ongoing digital transformation of how businesses and consumers interact with each other,” said BBG CEO Chris Roach in a prepared statement. “As a result, more data centers will need to be built or renovated, in order to provide the storage capacity required for the exponential growth in data usage.”