Three Data Center Trends to Watch in 2021

In previous blogs we wrote about the dramatic growth in data center and colocation real estate going back almost a decade. At the beginning of 2020, no one predicted the COVID-19 pandemic, its global reach or the data center industry’s fast response. Despite the demands of social distancing and the expedited work-at-home model for most businesses, the sector still over performed all other real estate sectors, and that should continue this year. According to Infiniti Research the global data center market is projected to grow 18% annually to exceed $270 billion through 2024.

So what can we expect in 2021? We take a look at what trends and challenges might guide how the data center real estate sector accomplishes similar growth.

1. The hyperscale data center model emerges as industry favorite

While there may not be a standard definition of a hyperscale data center, they are best described as massive raised-floor environments hosting thousands of servers in a facility that can be several hundred thousand square feet delivering 10 megawatts (MWs) to  more than 100 MWs of critical load. The major cloud competitors using this hyperscale ecosystem — including Amazon Web Services (AWS), IBM, Google, Facebook, Apple and Microsoft — continue to spend billions in new data centers in the U.S. and worldwide.

So bigger is better and the hyperscale developers will continue to gain market share in cloud computing. According to 2019 data from the technology research firm Omdia, hyperscale companies had 35% of the total cloud services revenue, which is an increase from 24% in 2016.  

2. Green initiatives rise in importance across the data center landscape

It is no secret that data centers are power hogs, since for example, the 10 MWs it might take to operate a large data center is the equivalent of powering over 8,000 U.S. households. As such, their power usage, despite the importance for internet users globally, is under more scrutiny and accountability. Some Tier 1 data center markets, including Silicon Valley and Seattle, are pressing for more energy efficiency commitments for new facilities. At the same time, other major markets, such as Eastern Washington, benefit from existing hydro power to deliver such efficiency and remain popular growth markets as a result.

In data center site selection, access to renewable energy is an important factor in the site selection decision matrix. Calendar 2021 will continue to see increased commitments to carbon neutral (or even carbon negative), especially from the hyperscale sector where Amazon Web Services, Microsoft and Google have stated commitments to do so over the next five to seven years.

3.  Edge data centers continue their expansion and importance in data center architecture

Edge data centers provide the ability to store and use computing power as close as possible to the user’s location, where the “action” is, thereby enabling operational efficiency with the consumer and business devices. While there are a myriad of ways that data center operators are developing edge sites, they tend to be much smaller facilities, with the same components of a standard data center, close to the intended consumer to deliver cached data with cloud computing resources.

With consumers demanding single millisecond response time coupled with the growth of 5G networks, smart cities, gaming apps, real-time stock trading, among many advanced technologies, much of the edge data center and colocation network remains to be built out. According to an IDC Data Age 2025 report, “By 2025, 175 zettabytes (or 175 trillion gigabytes) of data will be generated around the globe. Edge devices will create more than 90 zettabytes of that data.”

Such dramatic demand in edge data centers will be an important growth factor in 2021. Even more interesting is that the hyperscale cloud competitors are also seeing the importance of the edge and expanding their infrastructure. Amazon may have purchased Whole Foods for its physical grocery locations and delivery services, for example, but it is also helpful that Amazon Web Services can install edge data centers at the same location.

Conclusion

The COVID-19 pandemic changed the data center and colocation landscape for many corporations with a continued emphasis on securing business continuity with its IT systems. According to IDC, nearly 80% of businesses will ramp up their cloud and IT infrastructure system shift at twice the pre-C speed by the end of 2021.

The expected result is that the data center and colocation real estate market is set for robust growth in 2021.