With white-hot growth in data center site selection from 2014-2019, projections in late 2019 suggested that 2020 would also be an above average year for data center companies, hyperscale users and colocation providers. The sector remains healthy despite the national and global economic challenges due to the coronavirus pandemic.
We’ll take a look at the top stories in the first half of 2020 and the forecast for the remainder of the year.
We cannot start the discussion of the top 2020 stories without leading off with the COVID-19 pandemic and its impact on the business world. In a very short period of time, all business pivoted from a work environment to working from home. What this sheltering in place did was substantially increase the reliance on IT infrastructure. This forced experiment has shown some positive results. Over 90% of companies believed that their IT infrastructure was able to handle the new stay-at-home requirement, according to a report from 451 Research.
As such, the COVID-19 crisis has actually been a boon to the data center and colocation sector. While businesses had to maintain the robustness of their IT systems at work, they had to ensure that the work-at-home resources mirrored the work environment. Several new critical initiatives are transforming the workplace (and the data center), where business travel is all but shut down and videoconferencing services such as Zoom, Microsoft Teams and Google Meet have exploded. All are scaling up their services with substantial increases in data center capacity, according to two recent Data Center Knowledge articles:
Most Data Center and Colocation Operators’ expansion plans remain in place
The result for the data center market is that increased reliance on IT networks and expanding the robustness of digital infrastructure appears to be business as usual. And so it follows that many of the hyperscale data center operators and colocation companies continue to remain bullish on their operations such as:
More money flows into enterprise class data center and colocation operations
Investor interest remains high for data centers amid this economic disruption caused by the coronavirus pandemic. Other commercial real estate asset classes, such as retail, are suffering with portions having an uncertain future. The data center sector requires significant capital investment, and investment money is flowing into individual projects and also into businesses, with new investment groups entering in the first half of 2020:
Even some bad news is good news
Some data center and telecom companies may have had “hiccups” in their operations, but even during the economic downturn, a few are moving forward looking leaner and meaner:
Maryland offers data center economic incentives
On the site selection data center matrix, infrastructure, power and real estate are important factors, but economic incentives can be crucial for the final decision and can be a difference-maker. The state of Maryland just approved a new exemption from the state’s sales and use tax for the sale of qualified personal property to qualified data centers. The creation of the data center tax exemption brings Maryland into line with its neighboring state, Virginia, on sales tax policy.
While the pandemic and the resulting global economic downturn has impacted so many consumers and businesses, the new paradigm of doing business continues to provide an opportunity in the data center and colocation sector.