{"id":1004261600,"date":"2018-08-31T04:43:09","date_gmt":"2018-08-31T12:43:09","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004261600"},"modified":"2022-12-08T17:01:01","modified_gmt":"2022-12-09T01:01:01","slug":"cloud-activity-drives-data-center-demand","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/cloud-activity-drives-data-center-demand\/","title":{"rendered":"Cloud Activity Drives Data Center Demand"},"content":{"rendered":"

By Gail Kalinoski<\/em><\/p>\n

\"Cloud<\/a><\/p>\n

Cloud activity continues to drive demand in the data center market, particularly in Northern Virginia\u2014the sector\u2019s largest market in the U.S. and the world\u2014but also in other major and secondary markets where new construction is snapped up often before it delivers, according to two new reports from JLL and CBRE.<\/p>\n

\u201cWe\u2019re still roaring along at double-digit growth pretty much across the board,\u201d <\/em>Curt Holcomb, executive vice president, JLL Data Center Solutions co-lead, told Commercial Property Executive.<\/em><\/p>\n

Holcomb said the activity among the cloud providers has been growing in major U.S. markets and now in secondary markets, including San Antonio and Austin, Texas. JLL\u2019s Global Data Center Outlook<\/em> for the first half of 2018 noted the combined megawatt (MW) absorption in those two cities was 9.6 MW for the first half of 2018, placing it 13th<\/sup> in MW absorption across the world and 7th<\/sup> in the U.S.<\/p>\n

\u201cWe\u2019re starting to see not only a lot of demand but a lot of the major providers are starting to move into those (secondary) markets,\u201d<\/em> he said.<\/p>\n

CBRE\u2019s latest U.S. Data Center Trends Report <\/em>also cited Northern Virginia as the most active data center market, with net absorption of 100 MW in the first half of 2018. It was followed by Phoenix (32.5 MW); Dallas\/Fort Worth (19.1 MW); Silicon Valley (10.6 MW) and Austin\/San Antonio (9.8 MW) rounding out the top five most active U.S. markets.<\/p>\n

Northern Virginia, which added 198 MW<\/a> since the first half of 2017, has an additional 297.2 MW under construction. More than 474 MW of capacity is under development in the primary U.S. markets, with nearly 55 percent preleased, CBRE noted. Some places don\u2019t have enough supply to meet the growing demand.<\/p>\n

\"Pat<\/a>

Pat Lynch, senior managing director, Data Center Solutions, CBRE<\/p><\/div>\n

\u201cTight market conditions in Silicon Valley have forced occupiers to expand into other markets, notably Phoenix, which has record levels of construction underway,\u201d <\/em>Pat Lynch, senior managing director, Data Center Solutions, CBRE, said in a prepared statement.<\/p>\n

Phoenix had 61.4 MW under construction<\/a> followed by Dallas\/Fort Worth (45.6 MW); Silicon Valley (29.5 MW) and Atlanta (21 MW).<\/p>\n

\u201cWe do not expect to see a slowdown in demand from cloud users in the near future, as end users continue to migrate their IT needs to the cloud to save costs and for added flexibility,\u201d<\/em> Lynch said.<\/p>\n

The JLL report put the construction numbers higher, with 317.0 MW under construction in the first half of 2018 in Northern Virginia and 136.5 MW in Phoenix. Among the providers with new deliveries between now and Q1 2019 are Coresite, CyrusOne, Digital Realty, Equinix, Infomart, Iron Mountain, QTS, Sabey and Vantage.<\/p>\n

Both Lynch and Holcomb said hyperscale cloud users in particular are driving demand in Northern Virginia. Cloud users accounted for 65 percent of the market\u2019s net absorption, according to CBRE.<\/p>\n

\u201cFacebook, for instance, did a tremendous amount of leasing in the first six months,\u201d<\/em> Holcomb noted.<\/p>\n

Holcomb said the DFW market continues to be the dominant large enterprise colocation market.<\/p>\n

\u201cSupply in Dallas\/Ft. Worth (DFW) is growing as many providers have just delivered new buildings to the market in response to healthy absorption at other facilities in past year,\u201d<\/em> the report stated. \u201cCyrusOne and QTS are both delivering new builds. Equinix (Infomart), Skybox, Stream and Edgecore have land positions and are in the design phase.\u201d<\/em><\/p>\n

Top Trends<\/strong><\/h2>\n

One of the top trends JLL cited in its report is \u201cmodernizing\u201d<\/em> of data center contracts to deal with changes in recent years in the data center industry.<\/p>\n

\u201cLarge lease deals from five to 10 years ago are starting to roll. The data center industry of today is different; applications have been virtualized; the cloud is an enterprise strategy, and flexibility and access to capacity has changed,\u201d <\/em>the JLL report stated. \u201cExpect renewals, new leases and new service agreements to continually evolve and restructure to better fit how players today do business.\u201d<\/em><\/p>\n

Another trend is the growing acceptance of blockchain and its impact on the data center sector, according to JLL. The report noted the technology behind blockchain is attractive to various verticals and has the potential to change how transactions and data are shared and organized.<\/p>\n

\"Curt<\/a>

Curt Holcomb, executive vice president, JLL Data Center Solutions<\/p><\/div>\n

\u201cWe\u2019re starting to see blockchain projects being housed at colocation facilities,\u201d<\/em> Holcomb said. \u201cWe\u2019ve just started to see it and we think it\u2019s going to really be a driver for demand going forward.\u201d<\/em><\/p>\n

The CBRE report looked at U.S. data center investment volume, noting it had reached $7 billion in the first half of the year, including single-asset, portfolio and entity-level transactions compared to 2017, when much of the investment was driven by entity-level deals.<\/p>\n

The three largest transactions in H1 2018 were GTT Communications\u2019 $2.3 billion acquisition of Interoute and its 15 data centers, 17 virtual data centers and 51 colocation facilities; Iron Mountain\u2019s $1.3 billion acquisition of IO Data Centers, including land and building at four U.S. data centers; and Equinix\u2019 acquisition of the Infomart Data Center in Dallas for $800 million<\/a>.<\/p>\n

\u201cWhile 2018 investment volume may not reach 2017\u2019s record setting investment of more than $20 billion, we still expect the investment market to produce strong results, driven by sale-leasebacks from enterprise users, cloud users looking for development partners and a continued influx of new investors into the data center sector,\u201d <\/em>Lynch said.<\/p>\n

Image courtesy of CBRE<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Northern Virginia remains the sector\u2019s largest market, but the lack of supply in some major metros is expected to drive more growth in secondary markets like Phoenix, San Antonio and Austin.<\/p>\n","protected":false},"author":1068,"featured_media":1004261606,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21755,21808,21783,23891,21742],"tags":[32789,32796],"class_list":["post-1004261600","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-data-centers","category-featured","category-investment","category-national","category-latest","tag-cbre","tag-jll"],"acf":[],"yoast_head":"\nCloud Activity Drives Data Center Demand - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/cloud-activity-drives-data-center-demand\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Cloud Activity Drives Data Center Demand\" \/>\n<meta property=\"og:description\" content=\"Northern Virginia remains the sector\u2019s largest market, but the lack of supply in some major metros is expected to drive more growth in secondary markets like Phoenix, San Antonio and Austin.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/cloud-activity-drives-data-center-demand\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2018-08-31T12:43:09+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-09T01:01:01+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2018\/08\/Cloud-Activity-Drives-Data-Center-Demand.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"620\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Gail Kalinoski\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/cloud-activity-drives-data-center-demand\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/cloud-activity-drives-data-center-demand\/\",\"name\":\"Cloud Activity Drives Data Center Demand - 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