In a yr when information facilities confronted their most troublesome energy challenges, the trade thrived however. In accordance with the North America Information Heart 12 months-Finish 2024 Report from actual property and funding administration firm JLL (NYSE: JLL), states that the colocation emptiness charge plummeted to a document low of two.6 % and absorption ranges doubled in simply two years.
A lot of this development has been pushed on the prime by the HPC-AI trade and its excessive demand for compute infrastructure. However JLL additionally mentioned a storm is brewing for the trade: the race for sources is reshaping the trade’s panorama, pushing growth into new markets and forcing utilities to rethink how they deal with the digital economic system’s voracious urge for food for vitality.
“The information middle sector stays one of the vital favored actual property asset lessons on account of insatiable tenant demand, restricted provide and rising rents,” mentioned Andy Cvengros, Govt Managing Director, Co-Lead of U.S. Information Heart Markets, JLL. “Nonetheless, energy availability has turn into the defining constraint on development, pushing growth into new markets searching for capability. It’s the brand new ‘gold rush,’ as builders, occupiers and buyers are competing for out there energy, land and tools. Extra energy technology is urgently wanted if provide goes to maintain up with demand.”
The report particulars demand ranges, with North American colocation emptiness at an all-time low regardless of a number of years of document building ranges. Absorption totaled 4.4 GW in 2024 – a quadruple enhance since 2020 – propelled by cloud suppliers, know-how firms and finance sectors. In 2024, synthetic intelligence represented about 15 % of knowledge middle workloads, and by 2030, it may develop to 40 %.
Eight-eight % of absorption in 2024 was in major markets, with Northern Virginia rocketing again to the highest spot with 847 MW of absorption within the second half of the yr and capturing 50 % of all demand in North America. Chicago (308 MW), Phoenix (166 MW), Dallas-Fort Value (123 MW) and Toronto (55 MW) spherical out the highest 5 markets for absorption within the second half of the yr.
The report additionally examines rising information middle markets throughout North America, as builders push into new territories looking for energy and land. Rising markets in West Texas, Louisiana, Alabama, New Mexico, Nebraska and Iowa are attracting vital funding from hyperscalers and colocation suppliers. Hyperscalers are usually the primary movers, adopted by colocation suppliers as a important mass develops.
Charlotte, N.C., is seeing surges in demand from each builders and finish customers. Over the past 24 months, hyperscalers have acquired roughly 1,900 acres throughout the Columbus, Ohio, area alone, and Minneapolis, Minn., has emerged as a knowledge middle vacation spot on account of its sturdy energy technology from present energy vegetation.
“Whereas core markets stay most popular and are seeing sturdy development, the seek for energy is resulting in speedy growth in new areas,” Cvengros added. “We’re seeing vital exercise in markets adjoining to established information middle hubs just like the I-35 Hall in Texas, northwest Indiana and central and southern Virginia, creating alternatives and challenges for each operators and communities.”
Development exercise remained sturdy in 2024, with greater than 2.6 GW of colocation capability accomplished through the yr with practically all of the house absorbed at supply. On the finish of 2024, a record-setting 6.6 GW of colocation capability was beneath building, with 78 % of the product beneath building in major markets. The pipeline of deliberate tasks elevated to 22.9 GW, confirming sturdy demand in established markets the place energy will be secured. Most markets have doubled or tripled in measurement since 2020, with Austin/San Antonio and Atlanta main the U.S. in market development adopted by Northern Virginia, the Pacific-Northwest and Phoenix.
“Information middle rents proceed to surge, with a 12 % year-over-year enhance in 2024 and an 11 % CAGR since 2020, as landlords preserve sturdy negotiating leverage in a market with near-zero emptiness,” mentioned Andrew Batson, Head of U.S. Information Heart Analysis for JLL. “Tenants renewing five-year leases are experiencing vital sticker shock, going through as much as 50 % hire will increase, and landlord concessions have gotten more and more uncommon on this tight market.”
The North American energy grid is taxed, leading to challenges round capability, scale and transmission. Information middle tasks are requiring extra energy annually, as new information facilities are actually generally 100 MW, with some tasks requesting as much as 1 GW of energy. Even among the many regional utilities with energy availability, few have capability out there on the scale required to help fashionable information facilities.
“Channeling immense electrical capability to a single venture requires vital planning and coordination, and, with grid connection wait instances averaging 4 years and doubtlessly costing tens of thousands and thousands of {dollars} in misplaced earnings, information middle operators are more and more turning to various vitality options,” mentioned Matt Landek, Division President, U.S. Information Heart Work Dynamics, who additionally leads JLL’s Information Heart Mission Improvement and Companies. “Pure fuel generators have emerged because the go-to bridge resolution, providing affordability, accessibility and speedy deployment. Some tasks are even contemplating everlasting on-site pure fuel generators for off-grid autonomy, regardless of the fee premium and emissions monitoring necessities.”
Whereas grid energy is probably the most inexpensive, dependable and accessible supply of electrical energy in North America, green-energy options like photo voltaic, wind, gas cells, hydrogen, nuclear and geothermal are in numerous levels of growth for information middle utilization. Some present promise as a major energy supply, others may play a job as supplemental inexperienced vitality.
With lead instances nonetheless 50 % above pre-pandemic ranges, information middle tools provide chains proceed to be challenged however are enhancing, with most tools out there for supply in six months or much less. Turbines, switchgears and transformers take a median of 11 months, relying on producer and mannequin. Reshoring of knowledge middle tools manufacturing is anticipated to assist cut back lead instances, however not till 2026-2027 since most of those new manufacturing amenities are presently beneath building. Information middle operators should develop agile approaches and sturdy threat mitigation plans.
The information middle sector stays among the many most favored actual property asset lessons for buyers, benefiting from elevated range in lender engagement. The market noticed sturdy urge for food all through 2024 throughout numerous deal profiles, from core stabilized property to value-add alternatives.
Vital future funding urge for food is anticipated from sovereign funds and separate accounts searching for large-scale investments. The one-asset borrower (SASB) and asset-backed safety (ABS) markets offered substantial liquidity, with information middle ABS quantity growing 49 % year-over-year to $9.0 billion in 2024.
“There’s sturdy demand from each money circulate consumers trying so as to add stabilized property and operators searching for value-add alternatives,” mentioned Carl Beardsley, Senior Managing Director, Information Heart Chief, JLL Capital Markets. “We count on funding exercise to extend in 2025, notably for hyperscale property as extra growth tasks attain completion.”
