40 Major Data Center Site Selection Projects of 2019

The data center real estate market remains a white-hot sector of the commercial real estate industry. The primary drivers to this growth and each data center site selection decision are the continued trends toward (1) cloud computing and hosting, (2) customer demand for more content-driven capacity on their devices including edge computing, (3) the implementation of 5G technology, and (4) business demand for significant big data analytics and artificial intelligence. This report evaluates the significant capital outlays dedicated to data center site selection coupled with expectations for the future.

The capital spending on new infrastructure is significant

Conway Analytics, an industry leader that monitors corporate facility expansions, tracked approximately 90 data center expansions across the U.S. during the past 12 months ended April 30. These announced projects ranged from new ground-up hyperscale data center campuses to existing facility expansions. The following map highlights 40 of the larger announced projects across the United States with some observations related to this particular data grouping:

• Over $15.3 billion in disclosed capital is projected to be spent once each project is fully completed, representing an average of $380 million per site.
• Facebook, Alphabet (Google), and Microsoft represent over 52% of the committed capital. (It is noted that Amazon Web Services, while very active in its data center construction, remains fairly secretive with its network, so its impact on new data center expansion is not reflected here.)
• CyrusOne, one of the fastest growing data center colocation operators globally, is the next largest company with nearly $1.89 billion across four U.S. projects. CyrusOne is a leading player in wholesale colocation and specifically caters to the above-mentioned cloud operators for its facilities.
• Out of the original Conway list of ~90 data center expansions, less than 10 data center projects are related to the private sector constructing or developing their own facilities, suggesting a further commitment of enterprise companies to host their IT operations with either third-party colocation operators or cloud companies.

Cloud computing and social media giants continue to gain momentum

According to International Data Corp.’s (IDC) Worldwide Semiannual Public Cloud Services Spending Guide: “Worldwide spending on public cloud services and infrastructure is forecast to reach $210 billion in 2019, an increase of 23.8% over 2018. ... The market is forecast to achieve a five-year compound annual growth rate (CAGR) of 22.5% with public cloud services spending reaching $370 billion in 2022. …The United States will be the largest geographic public cloud market with spending forecast to be $124.6 billion in 2019.”

As such, the cloud providers and colocation developers will continue to pour billions of dollars to increase their scale, extend their reach to all corners of the U.S. (the “edge”) and assure their competitiveness in the cloud and social media space.  According to an October 2018 McKinsey & Co. report, “estimates suggest, hyperscale data center operators have spent $185 billion on data centers—about $75 billion in 2017 alone. Amazon, Microsoft, Google, Apple, and

Facebook is responsible for almost 70% (some $50 billion) of these huge capital expenditures.”Thearticle suggested that much higher amounts will be spent over the next three years, “growing by more than 20% annually.”

Apple announced in early 2019 that it is committing over $10 billion over the next five years toward data center construction. Much of this spend will be for expansions at its Nevada, Arizona and North Carolina facilities and a ground-up site near Des Moines, Iowa.

Colocation providers and data center developers are following suit. While CyrusOne is already mentioned, other competitors, such as QTS, Switch, Digital Realty, Vantage Data Centers and Equinix are also each disclosing capital initiatives exceeding $1 billion across their portfolios.

Conclusions

Most data center experts remain very bullish on the data center real estate market, suggesting that much more infrastructure is needed. According to the technology research group, The Insight Partners, “The global data center construction market accounted for nearly $44 billion in 2017 and is expected to grow at a CAGR of 10.2% during the forecast period 2017 – 2025, to account for ~$93 Billion in 2025.” The U.S. market is projected to be nearly 60% of these totals.