2020 Trends For Data Center Real Estate

by Michael Rareshide, on Mar 24, 2020 3:27:22 PM

In each succeeding year over the past 10 years, data center requirements and technology have evolved very quickly with networks becoming more complex to meet the demands of consumers and businesses. The data center footprint and the technology to run critical operations for such needs as smart city initiatives, artificial intelligence and new 5G networks have changed data center site selection. Data center and colocation operators continue to adapt to these demands.  By every measure, we will continue to experience massive data center growth with a corresponding need for more capacity.

So what are the trends in 2020 that will move data center site selection forward in this highly evolving real estate sector?

More available colocation capacity in many Tier 1 markets

For the first time in many years, most of the Top 10 data center and colocation markets have available wholesale and retail colocation inventory to offer enterprises. In prior years, especially in the wholesale colocation sector, those colocation developers would typically have their inventory pre-leased. Having available inventory is not hurting the market.

What is important here is that the data center market is not in a glut situation, given all projections about this real estate sector. According to a recent report from Mordor Intelligence, “The data center colocation market was valued at USD 31.39 billion in 2019, and is expected to reach a value of USD 58.28 billion by 2025, at a CAGR of 10.92% over the forecast period (2020 - 2025)… It is estimated that there is an increase of 35% in data generated every year, globally, which has resulted in many organizations, doubling their on-premises storage over a three-year period interval.”

Hybrid cloud strategies are much more important for many businesses

Starting over a decade ago, businesses re-tooled their IT strategy from their self-operated data center to outsourcing their mission critical operations to a colocation provider. They then incorporated public cloud services from Amazon Web Services and Microsoft Azure that further reduced costs and latency but enhanced cloud interconnection. Companies realized some drawbacks over the lack of control and privacy by fully outsourcing all IT to the cloud.

Now the trend being pushed by these enterprises is more toward a hybrid colocation and cloud solution and the colocation providers are listening. Their raised-floor environments are evolving to provide the interconnection where the client’s private IT infrastructure can also access public and private cloud services. The customer retains the ability to reconfigure and adjust its cloud model along with its vital IT data assets, so the benefits are there and, as such, this trend continues to be rolled out.

Edge data centers remain an important part of data center strategy

The strategy behind edge computing is easy in concept yet has a multitude of variations to achieve its goal. The concept is to bring the data computing geographically close to the source needing the data and hopefully bring hyperscale infrastructure capabilities to the farthest corners. Doing so reduces “latency,” or the time it takes for a user’s request to travel through a network to a computer that can answer it. The source would be our cell phones or our home computer (when our kids are playing video games) or for businesses seeking faster internet.

In the not so distant past, the majority of cloud and colocation data centers were concentrated in a handful of markets nationwide, meaning that a large percentage of the U.S. population faced slow network speeds as a result of the distance needed to click their browser to then have those instructions executed at a data center halfway across the U.S. Not only did this latency make it problematic, but this centralized data center geography also caused bandwidth problems.

Simply put, the entire edge network continues to be built out and is not ready for full deployment.  Having more capacity at the “edge” allows for faster response times and also meets the demands of new technologies. For example, the full deployment will be imperative for such technologies as self-driving cars which obviously cannot have any latency issues.

The technology and hardware being used to deliver edge computing has numerous strategies. Several national colocation providers, such as EdgeConneX, TierPoint and 365DataCenters, offer edge solutions given their locations in many Tier II markets not served by the larger operators.

Several other companies, including EdgeMicro and Vapor IO, have developed “mini” containerized data centers that offer high-performance computing of up to 100 KW/rack. These data centers, as small as a food truck, can simply be drop-shipped anywhere based upon the customer’s needs. This strategy is being seen by the giant colocation players as a logical one. In early 2020, Equinix announced its acquisition of Packet, another small edge cloud provider.

Some other innovative solutions include Amazon’s use of its Whole Foods acquisition to house small edge sites. Several cell tower companies, which have existing networks in smaller markets, are using the benefits of their networks to expand the edge.

Coronavirus and its impact on data centers

Data centers are not normally known for their high people count so the COVID19 pandemic might not be perceived as an issue, the reality is that it is making an impact. These IT operations are even more critical with companies sending their employees home to work remotely, network access is the lifeline to these organizations. 

All colocation companies are implementing enhanced security measures related to any visitor or clients needing access to their network cages. Any non-essential work or anything that can be handled remotely is being emphasized. Sanitary controls are also in place, while these operators also address any employee concerns such as social distancing. This coronavirus pandemic has all third-party colocation operators readying their disaster recovery plans if needed.

Since the timeline of this global pandemic is unclear for the remainder of 2020, the resulting impact to data center real estate suggests a stay-in-place result.


While some of these 2020 trends are a continuation and expansion of prior year initiatives, the evolving data center market continues to have new technologies and challenges.

Topics:Economic DevelopmentReal EstateData CenterSite Selection GroupSite Selection



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