Top Data Center Stories in 2019

Over the past 10 years, data center real estate and site selection has seen enormous growth fueled by the robust networks required by data-driven platforms across social media, streaming services and e-commerce. Adding to this growth were many enterprise companies that realized the value of both the use of cloud services to meet their IT demands and outsourcing their IT infrastructure to third-party colocation operators. The past five years have seen additional initiatives in artificial intelligence, gaming sites and the Internet of Things (IoT) — contributing to the demands for more data centers and critical load capacity.

Let’s look at the top four stories of 2019 for data centers: 

1.  A strong data center market with some rightsizing at year-end

Up until 2019, the overall data center market seemed to be in catch-up mode across all competitive sectors to meet the global consumer demands. The largest global technology companies such as Facebook, Salesforce, Apple and Google gobbled up hundreds of megawatts of data center capacity each year, much of it as soon as it was announced and commissioned.

While 2019 started similarly to prior years, by the end of the year there appeared to be more of a rightsizing in both U.S. demand and delivered raised-floor capacity. The hyperscalers are still in their aggressive model of constructing more critical data center load. But it is in the enterprise sector where capacity has leveled off.  Many of the large financial and healthcare corporations have completed most or all of their outsourcing to both cloud and colocation operators, so this portion of the market will have less impact going forward.

2.  Robust data center merger and acquisition activity

Significant global investor money continues to flow into data center developers and colocation operators. There have been a several notable acquisitions and major fundings during this calendar year including:

• Zayo Group – operates a 130,000-mile fiber network and 51 carrier-neutral data centers across the U.S, and Europe. Zayo agreed to be acquired by Digital Colony Partners and EQT Partners for over $14 billion. Zayo’s revenue has benefited from the several next-generation services, including 5G wireless, cloud computing and e-commerce.
• T5 Data Centers – tapped a whopping $2.5 billion from QuadReal of Canada to build and buy data centers for hyperscale platforms and traditional enterprises.
• STACK Infrastructure – lined up $850 million to finance the growth of its wholesale data center operations. STACK is a new competitor that began operations at the end of 2018.

All of the major global technology players continued to invest dramatic sums in their networks in 2019.  According to a fourth quarter 2019 report by Synergy Research Group, “hyperscale operators led by the public cloud goliaths like Apple and Facebook, accounted for 33% of all spending on data center hardware and software in the first three quarters of 2019, up from 30% in 2018.”

As one example, Google reported that it spent over $13 billion in 2019 toward new data center campuses in Texas, Ohio, Arizona and Nevada along with expansions across several other existing hyperscale campuses.

4.  Rack densities in data centers increase

Close to half of a raised-floor data center’s total energy use can go to keeping equipment in the racks properly cooled. The computing power going into those equipment racks — especially the AI and gaming servers — are now commanding more electricity, so the challenge has been meeting the higher need to cool the racks efficiently. 

What had been an industry average of 5 kilowatts of servers installed per rack is now at the very low end. According to a recent 451 Research survey, over 45% of respondents projected that they will need computer rack densities over double or nearly 11 kW per rack.

The expectation is that there will continue to be new design strategies and technologies, such as liquid cooling, to meet these demands, as some current projections expect that an average 25 kW/rack density is not too far off in the future.

Conclusions

2019 continued to address the significant data center demand and infrastructure required for the data-hungry consumer and high-tech corporations. The hyperscale data center operators are immersed in meeting that demand. 2019 was also a transition year in a few industries although apparently this rightsizing isn’t expected to dampen 2020, which should shape up as another robust data center market.