In a yr when information facilities confronted their most tough energy challenges, the trade thrived however. Based on the North America Knowledge Heart 12 months-Finish 2024 Report from actual property and funding administration firm JLL (NYSE: JLL), states that the colocation emptiness charge plummeted to a document low of two.6 p.c and absorption ranges doubled in simply two years.
A lot of this development has been pushed on the prime by the HPC-AI trade and its excessive demand for compute infrastructure. However JLL additionally stated a storm is brewing for the trade: the race for assets is reshaping the trade’s panorama, pushing improvement into new markets and forcing utilities to rethink how they deal with the digital financial system’s voracious urge for food for power.
“The information heart sector stays probably the most favored actual property asset lessons because of insatiable tenant demand, restricted provide and rising rents,” stated Andy Cvengros, Government Managing Director, Co-Lead of U.S. Knowledge Heart Markets, JLL. “Nonetheless, energy availability has grow to be the defining constraint on development, pushing improvement into new markets searching for capability. It’s the brand new ‘gold rush,’ as builders, occupiers and traders are competing for accessible energy, land and gear. Extra energy technology is urgently wanted if provide goes to maintain up with demand.”
The report particulars demand ranges, with North American colocation emptiness at an all-time low regardless of a number of years of document building ranges. Absorption totaled 4.4 GW in 2024 – a quadruple improve since 2020 – propelled by cloud suppliers, know-how firms and finance sectors. In 2024, synthetic intelligence represented about 15 p.c of information heart workloads, and by 2030, it may develop to 40 p.c.
Eight-eight p.c of absorption in 2024 was in major markets, with Northern Virginia rocketing again to the highest spot with 847 MW of absorption within the second half of the yr and capturing 50 p.c of all demand in North America. Chicago (308 MW), Phoenix (166 MW), Dallas-Fort Price (123 MW) and Toronto (55 MW) spherical out the highest 5 markets for absorption within the second half of the yr.
The report additionally examines rising information heart markets throughout North America, as builders push into new territories looking for energy and land. Rising markets in West Texas, Louisiana, Alabama, New Mexico, Nebraska and Iowa are attracting vital funding from hyperscalers and colocation suppliers. Hyperscalers are usually the primary movers, adopted by colocation suppliers as a crucial mass develops.
Charlotte, N.C., is seeing surges in demand from each builders and finish customers. During the last 24 months, hyperscalers have acquired roughly 1,900 acres throughout the Columbus, Ohio, area alone, and Minneapolis, Minn., has emerged as an information heart vacation spot because of its strong energy technology from current energy crops.
“Whereas core markets stay most popular and are seeing robust development, the seek for energy is resulting in speedy improvement in new areas,” Cvengros added. “We’re seeing vital exercise in markets adjoining to established information heart hubs just like the I-35 Hall in Texas, northwest Indiana and central and southern Virginia, creating alternatives and challenges for each operators and communities.”
Development exercise remained strong in 2024, with greater than 2.6 GW of colocation capability accomplished in the course of the yr with practically all of the house absorbed at supply. On the finish of 2024, a record-setting 6.6 GW of colocation capability was below building, with 78 p.c of the product below building in major markets. The pipeline of deliberate initiatives elevated to 22.9 GW, confirming robust demand in established markets the place energy might be secured. Most markets have doubled or tripled in dimension since 2020, with Austin/San Antonio and Atlanta main the U.S. in market development adopted by Northern Virginia, the Pacific-Northwest and Phoenix.
“Knowledge heart rents proceed to surge, with a 12 p.c year-over-year improve in 2024 and an 11 p.c CAGR since 2020, as landlords keep robust negotiating leverage in a market with near-zero emptiness,” stated Andrew Batson, Head of U.S. Knowledge Heart Analysis for JLL. “Tenants renewing five-year leases are experiencing vital sticker shock, going through as much as 50 p.c hire will increase, and landlord concessions have gotten more and more uncommon on this tight market.”
The North American energy grid is taxed, leading to challenges round capability, scale and transmission. Knowledge heart initiatives are requiring extra energy annually, as new information facilities are actually generally 100 MW, with some initiatives requesting as much as 1 GW of energy. Even among the many regional utilities with energy availability, few have capability accessible on the scale required to help fashionable information facilities.
“Channeling immense electrical capability to a single challenge requires vital planning and coordination, and, with grid connection wait occasions averaging 4 years and doubtlessly costing tens of tens of millions of {dollars} in misplaced income, information heart operators are more and more turning to different power options,” stated Matt Landek, Division President, U.S. Knowledge Heart Work Dynamics, who additionally leads JLL’s Knowledge Heart Venture Growth and Providers. “Pure gasoline generators have emerged because the go-to bridge resolution, providing affordability, accessibility and speedy deployment. Some initiatives are even contemplating everlasting on-site pure gasoline generators for off-grid autonomy, regardless of the price premium and emissions monitoring necessities.”
Whereas grid energy is probably the most inexpensive, dependable and accessible supply of electrical energy in North America, green-energy options like photo voltaic, wind, gas cells, hydrogen, nuclear and geothermal are in numerous phases of improvement for information heart utilization. Some present promise as a major energy supply, others may play a job as supplemental inexperienced power.
With lead occasions nonetheless 50 p.c above pre-pandemic ranges, information heart gear provide chains proceed to be challenged however are bettering, with most gear accessible for supply in six months or much less. Mills, switchgears and transformers take a median of 11 months, relying on producer and mannequin. Reshoring of information heart gear manufacturing is predicted to assist cut back lead occasions, however not till 2026-2027 since most of those new manufacturing amenities are at present below building. Knowledge heart operators should develop agile approaches and strong danger mitigation plans.
The information heart sector stays among the many most favored actual property asset lessons for traders, benefiting from elevated variety in lender engagement. The market noticed robust urge for food all through 2024 throughout numerous deal profiles, from core stabilized belongings to value-add alternatives.
Vital future funding urge for food is predicted from sovereign funds and separate accounts looking for large-scale investments. The one-asset borrower (SASB) and asset-backed safety (ABS) markets offered substantial liquidity, with information heart ABS quantity rising 49 p.c year-over-year to $9.0 billion in 2024.
“There’s strong demand from each money move patrons trying so as to add stabilized belongings and operators looking for value-add alternatives,” stated Carl Beardsley, Senior Managing Director, Knowledge Heart Chief, JLL Capital Markets. “We count on funding exercise to extend in 2025, significantly for hyperscale belongings as extra improvement initiatives attain completion.”
