Data Center Site Selection Activity Surges into 2022
by King White, on Apr 14, 2022 11:18:28 AM
2021 was a big year for the data center industry as the demand for capacity continued to surge.
Site Selection Group identified over 150 data center projects that were announced across the world in 2021. The industry is growing rapidly due to the digitization of most industries, rising data traffic, and demand for data storage and processing infrastructure. The significant growth has led to the expansion of corporate, colocation, and hyperscale data centers.
To illustrate the growth of the industry, Site Selection Group identified 24 of the largest data center announcements in the U.S. in 2021 (see table below). All regions and all sizes are represented, ranging from colocation provider Ragingwire in Mesa, AZ ($230 million) to TA Realty in Leesburg, VA ($1.8 billion). Corporate data centers include Microsoft, Facebook (Meta), Google, and Apple.
|Company Name||Location||Capital Investment ($M)|
|TA Realty||Leesburg, VA||$1,800.00|
|New Albany, OH||$1,000.00|
|Prime Data Centers||Elk Grove Village, IL||$1,000.00|
|Los Lunas, NM||$800.00|
|Meta||Kansas City, MO||$800.00|
|Skybox Data Centers||Pflugerville, TX||$548.00|
|Lake Mariner Data LLC||Barker, NY||$525.00|
|Moncks Corner, SC||$500.00|
|Magellan Enterprises LLC||Columbus, OH||$500.00|
|Table Mountain Industries||Columbus, OH||$500.00|
|QTS Realty Trust||Sandston, VA||$425.00|
|Talen Energy Corporation||Salem Township, PA||$400.00|
|Microsoft||Hoffman Estates, IL||$300.00|
|Nautilus Data Technologies, Inc.||Millinocket, ME||$300.00|
|Rowan Green Data||Temple, TX||$300.00|
|Microsoft||West Des Moines, IA||$290.00|
|Greenidge Generation Holdings||Spartanburg, SC||$264.00|
Sources: Site Selection Group and IncentivesFlow, A Service from WAVTEQ Limited
The explosion of e-commerce, social media, and cloud services requires additional data center capacity, which will be further challenged by the rapid expansion or deployment of technologies such as edge computing, artificial intelligence, 5G, autonomous vehicle technology, blockchain, and virtual reality communities.
High Demand Continues in 2022
Over the last five years, demand has grown steadily for colocation data centers in primary markets such as northern Virginia, Dallas, Atlanta, Silicon Valley, and Phoenix. In fact, capacity has more than doubled during that time, driven by the astounding growth of cloud computing. New data centers are being constructed across the U.S.—especially in northern Virginia, California, Georgia, and Oregon—with nearly half of them already fully leased before construction is completed.
However, data center construction does face challenges in 2022, including lack of open space for building, power limitations, and supply chain uncertainties. With speed a top priority, data center developers will have to consider more expensive vertical construction in some cases. All of these challenges will likely drive up lease rates by 5%-7%.
Despite the prospect of higher rates, no slowdowns are foreseen for 2022. Big project announcements continue—in March, for example, Meta announced plans for a data center outside Austin in Temple, Texas. The $800-million hyperscale data center will be 900,000 square feet and open in 2024. Meta then announced another data center, of similar scale and cost, at Golden Plains Technology Park, a 5.5-million-square-foot data center campus in Kansas City, Missouri.
Key Site Selection Factors for Data Centers
Utilizing a proven site selection process is critical for data center users. Some of the primary site selection factors to consider include:
- Access to infrastructure and fiber
- Competitive utility prices
- Reduced risk of natural disasters and other threats
- Renewable energy resources
- Proximity to major markets and customers
- A strong pool of talent and reasonable labor costs
- Desirable business climates
- Availability of economic incentives
As strong as the need is for additional data center capacity, growth may be slower than expected because of supply chain disruptions and material shortages, which could delay construction schedules. Even with these constraints, double-digit growth in annual revenues for data centers is expected in 2022.
Available sites for data center facilities, especially in choice areas, are limited in number and are purchased or leased quickly. To find the best location for your data center project, work with a site selection firm that is experienced in this market and can expeditiously negotiate real estate and economic incentives.