Is Atlanta the New ‘Data Center Alley’?
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Covid has rapidly increased the pace of digital transformation of business and the economy, education, finance — and social life. The data center industry has seen incredible growth during Covid, as the infrastructure enabling this transformation. According to a forthcoming CBRE report debuted at the Cowen conference in August 2021, the growth in the sector has been driven by digital infrastructure companies adapting to evolving work structures, hybrid work structures, and the expansion of cloud service providers taking up space in wholesale colo data centers to meet the growing demand of their end users. Primary markets in the U.S. grew by 7% In the first half of this year — to 213.7 megs of wholesale colocation, which amounted to 14% growth year over year.
The Challenge Ahead: Powering the Datacenter
Yet despite this growing market, there are challenges ahead: Both the EU and US markets are seeing potential mismatch in terms of the speed of development of digital infrastructure, and the development of power supply, which could impact or delay data center growth in key hubs. Northern Virginia is a good example of that: as data centers continue to gravitate there: CBRE reported 127 megawatts in new inventory there in the first half of 2021 alone, or 9% growth. Based on this current rate of growth, Northern Virginia could see over 1.6 gigawatts by year end. The sheer volume of data centers in that market is driving so much power demand that there is concern about potential delays in substation deliveries: New development could potentially have trouble getting substations delivered to their new sites, which could create a bottleneck in new supply, which would affect both price and metrics.
Atlanta: The New Data Center Alley?
Discussion then focused on the rapid growth in the South: Atlanta has become a hot market: in 2021, Atlanta delivered over 15 megs, driven by the hyperscalers. Erick Contag, CEO of GlobeNet Telecomm explained that there may be new subsea cabling projects connecting South America with the U.S. coming in through the Gulf, which would make Atlanta an attractive site for connecting the two continents. CBRE has already seen the Atlanta market heating up, including an increase in hyper scale land banking: One cloud provider has already purchased three very large swaths of land in Atlanta, with plans to build three hyperscale data centers simultaneously in the market. The growth there has been so rapid, some are even starting to refer to Atlanta as “South Ashburn” — after Data Center Alley in Loudoun County, Virginia. Could Atlanta become the next Data Center Alley?
ESG Is the Future
Finally, the research team from CBRE emphasized the growing importance of ESG considerations in terms of data center investment. They talked about how the data center industry has been working on improving the environment, social, and governance components, pushed by their clients to improve in these areas. There are enough smart people in the industry that will figure out this problem — Infrastructure Masons for one is now standing up a new Tech Innovation pillar, with the aim of driving innovation in the data center industry, with an eye to environmental gains as well.
Certainly, strides in power generation and storage, combined with new “digital urban planning” to address future power distribution particularly in growing “hub” markets necessitates better interfacing and education with governmental representatives, many of whom may not even know what a data center is. And lastly — looking forward, driving innovation toward new ways of powering, storing power, greener backup generators, and innovations in cooling which address water shortage issues will be key. As Ed Socia, Director of Research, Data Center Solutions at CBRE and author of the new report put it, “Looking at Data Centers as a piece of the broader ‘Digital Infrastructure’ puzzle is imperative to growing businesses intelligently. There’s much to be said about what goes on beyond just the four walls of the data center, from the generation and delivery of clean, renewable power, to reliable connectivity and robust network infrastructure. The high-quality, highly-connected facilities are the assets that have garnered the most attention from investors.” Overall — the future looks bright for the data center industry.