Data Centers Follow the Power Trail
New research says data center demand is seen following energy locations across the world
Data center demand remained strong in the second half of 2023 but supply remained limited due to physical space and energy availability not going hand-in-hand. Which means that the way forward for data centers could be to first locate power sources as its global demand shows no signs of abating in 2024, says a new research report.
Research conducted by real estate and investment management giant Jones Lang Lasalle (JLL) says power availability and elongating delivery timelines on data centers could negatively impact adoption. The exponential progress of artificial intelligence (AI) and machine learning is fueling a wave of transformative shifts in data center design, site selection, and investment strategies, the report says.
According to JLL’s managing director of Data Center business Andy Cvengros, demand remains at an all time-high while data center growth is expanding from its core markets to tertiary ones seeking more power. This is a trend that India could well use, given that several large data center providers are now looking at smaller cities to set up shop.
India best positioned to benefit
The India Data Center Market size is estimated at 2.01 thousand MW in 2024, and is expected to reach 4.77 thousand MW by 2029, growing at a CAGR of 18.79% during the forecast period (2024-2029), says a report from Mordor Intelligence.
The report noted that growing adoption of smart technologies by the urban population coupled with attractive incentives offered by state governments has led data center operators setting up huge data processing facilities in the country.
“As businesses evolve in India, large businesses increasingly focus on tier 3 and tier 4 data centers due to their lower downtime, disaster recovery, and onsite assistance facility. This has led to the growth of tier 3 and tier 4 data centers in the region,” says the report.
Where’s the real challenge lying?
The JLL report notes that in the US, secondary markets were becoming more cost-effective and had shorter power delivery timelines. It takes the example of Salt Lake City in Utah that has witnessed increased data center construction activities.
However, the lack of adequate power availability led to slowing down of data center availability that caused a spike in pre-leasing. This resulted in IT teams across enterprises extending their planning timelines and committing to space and power far earlier than they might have done in a normal situation.
Demand for more power also resulted in an increase in energy costs alongside the spike in utility infrastructure investments. The average power rates rose both in primary and secondary data center markets between 2022 and 2023, the report says, adding that a 15.6% average spike in primary and a 9% increase in secondary markets were visible.
Decentralization the road ahead?
The research also identified the trends that were driving up demand for data centers, with the main impact coming from GenAI and hyperscale demand and proximity of interconnection points. The massive amount of computing capacity required for GenAI also meant higher quantum of power demand.
In the US markets, cloud providers and hyperscalers were driving demand that made it tougher for smaller businesses to secure colocation space and power. This has resulted in distributed cloud environments and outsourcing of data center operations becoming the norm. In India too, the move towards decentralization is just kicking off and a similar trend could be visible soon.
Writing in Forbes magazine, Max (Chong) Li, faculty member at Columbia University, says the underutilization of numerous independent data centers across the world leads to bottlenecks that has a cascading effect of escalating prices for GPU computing. As a result several projects are aiming to construct a decentralized cloud network to maximize these untapped compute resources, with a focus on AI business applications.
