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Global Data Center Growth Inhibited Due to Power Shortage
Here’s the good news from the data center front. Technologies – including streaming, gaming, self-driving cars and artificial intelligence growth – drive the demand for data centers worldwide.
The bad news? A worldwide shortage of available power and space is setting the brakes on the growth of the global data center market. CBRE’s recently released Global Data Center Trends 2023 report indicated that “sourcing enough power is a top priority of data center operators across North America, Europe, Latin America and Asia-Pacific.” The result is that secondary markets with those power supplies are in good shape to attract data center operators.
Though all four regions mentioned in the report added supply to their respective markets, vacancies are near-record lows. Vacancies in Silicon Valley stand at 2.9%, while Santiago, in Chile, reported a 3% vacancy in Q1 2022 (down from 11.7% from the year before). Meanwhile, in Europe, “there will be little relief for occupiers seeking capacity in Europe’s top markets this year,” the report’s authors noted.
Against this backdrop, it’s not surprising that positive absorption and increased rental rates are happening. The report noted that in North America, Northern Virginia reported 355.6 MW of positive absorption from Q1 2022 to Q1 2023. There is also more power capacity availability outside of NoVa in Central Virginia.
During that same period, Dallas-Fort Worth, Chicago and Silicon Valley also showed an increase in positive absorption at 62.8 MW, 62.5 MW and 45.7 MW, respectively. The report said that expanding into new local markets could meet Silicon Valley’s capacity issues. Meanwhile, in Dallas-Fort Worth, ERCOT’s and Oncore Electric’s available power is generating shorter timelines for development.
Regarding pricing, all four regions reported increased rental rates due to a lack of available inventory. North America faces a lack of power availability, expensive land, high materials and labor costs and supply chain delays. Meanwhile, European operators continue passing along higher occupational and build costs to their customers by increasing their rental rates. Colocation rental rates in Latin America and Asia-Pacific also continue to grow.
The situation is expected to remain the same for a while. Data center demand is anticipated to continue growing exponentially. “This will spur innovations in data center design and technology, as operators aim to deliver the capacity that meets the increased power density requirements of high-performance computing,” the CBRE report said.
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