In a yr when information facilities confronted their most troublesome energy challenges, the trade thrived nonetheless. In keeping with the North America Information Middle Yr-Finish 2024 Report from actual property and funding administration firm JLL (NYSE: JLL), states that the colocation emptiness fee plummeted to a report low of two.6 p.c 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 assets is reshaping the trade’s panorama, pushing improvement into new markets and forcing utilities to rethink how they deal with the digital financial system’s voracious urge for food for vitality.
“The information middle sector stays probably the most favored actual property asset courses attributable to insatiable tenant demand, restricted provide and rising rents,” mentioned Andy Cvengros, Govt Managing Director, Co-Lead of U.S. Information Middle Markets, JLL. “Nevertheless, energy availability has turn out to be the defining constraint on development, pushing improvement into new markets seeking capability. It’s the brand new ‘gold rush,’ as builders, occupiers and buyers are competing for out there energy, land and tools. Extra energy era 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 report development ranges. Absorption totaled 4.4 GW in 2024 – a quadruple improve since 2020 – propelled by cloud suppliers, expertise corporations and finance sectors. In 2024, synthetic intelligence represented about 15 p.c of information middle workloads, and by 2030, it might develop to 40 p.c.
Eight-eight p.c of absorption in 2024 was in main 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 p.c 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 vital mass develops.
Charlotte, N.C., is seeing surges in demand from each builders and finish customers. During the last 24 months, hyperscalers have acquired roughly 1,900 acres throughout the Columbus, Ohio, area alone, and Minneapolis, Minn., has emerged as an information middle vacation spot attributable to its strong energy era from present energy crops.
“Whereas core markets stay most popular and are seeing robust development, the seek for energy is resulting in fast improvement 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.”
Building exercise remained strong in 2024, with greater than 2.6 GW of colocation capability accomplished throughout the yr with almost all of the house absorbed at supply. On the finish of 2024, a record-setting 6.6 GW of colocation capability was below development, with 78 p.c of the product below development in main markets. The pipeline of deliberate tasks elevated to 22.9 GW, confirming robust demand in established markets the place energy might be secured. Most markets have doubled or tripled in dimension 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 p.c year-over-year improve in 2024 and an 11 p.c CAGR since 2020, as landlords preserve robust negotiating leverage in a market with near-zero emptiness,” mentioned Andrew Batson, Head of U.S. Information Middle Analysis for JLL. “Tenants renewing five-year leases are experiencing vital sticker shock, dealing with as much as 50 p.c lease 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 trendy information facilities.
“Channeling immense electrical capability to a single undertaking requires vital planning and coordination, and, with grid connection wait instances averaging 4 years and probably costing tens of hundreds of thousands of {dollars} in misplaced earnings, information middle operators are more and more turning to different vitality options,” mentioned Matt Landek, Division President, U.S. Information Middle Work Dynamics, who additionally leads JLL’s Information Middle Mission Improvement and Companies. “Pure fuel generators have emerged because the go-to bridge resolution, providing affordability, accessibility and fast deployment. Some tasks are even contemplating everlasting on-site pure fuel generators for off-grid autonomy, regardless of the associated fee premium and emissions monitoring necessities.”
Whereas grid energy is essentially 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 phases of improvement for information middle utilization. Some present promise as a main energy supply, others might play a job as supplemental inexperienced vitality.
With lead instances nonetheless 50 p.c above pre-pandemic ranges, information middle tools provide chains proceed to be challenged however are bettering, with most tools out there for supply in six months or much less. Mills, switchgears and transformers take a median of 11 months, relying on producer and mannequin. Reshoring of information middle tools manufacturing is anticipated to assist cut back lead instances, however not till 2026-2027 since most of those new manufacturing amenities are at present below development. Information middle operators should develop agile approaches and strong danger mitigation plans.
The information middle sector stays among the many most favored actual property asset courses for buyers, benefiting from elevated range in lender engagement. The market noticed robust urge for food all through 2024 throughout numerous deal profiles, from core stabilized belongings to value-add alternatives.
Important 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 rising 49 p.c year-over-year to $9.0 billion in 2024.
“There’s strong demand from each money stream consumers wanting so as to add stabilized belongings and operators searching for value-add alternatives,” mentioned Carl Beardsley, Senior Managing Director, Information Middle Chief, JLL Capital Markets. “We anticipate funding exercise to extend in 2025, significantly for hyperscale belongings as extra improvement tasks attain completion.”
