Data center industry analyst group DatacenterHawk has reported in its Q1 2023 recap that data center absorption has reached the lowest level since Q3 2021 in North America.
Despite this, overall demand for the industry remains high, globally.
DatacenterHawk president, David Liggitt, said: “We anticipate a fascinating year of development in the data center industry. Market analysis will play a crucial role as key stakeholders navigate the challenges of power limitations, supply chain issues, and rising costs, all while demand for data center infrastructure remains strong.”
The market research has noted that data center development in the US has slowed down after record levels in 2020-22, while demand across LATAM has significantly increased.
According to the report, power limitations, supply chain issues, and rising costs have created "new opportunities in emerging markets to capture the demand that supply-constrained primary markets have not been able to accommodate."
North America
The North American market has somewhat cooled after a busy 2020-22. Across those two years, North America achieved several record-setting periods of absorption, but this has since slowed. Absorption in North America in Q1 2023 (436MW) was the lowest it’s been since Q3 2021 (158MW).
Overall, rental rates are rising but at a slower rate than the year previous.
Enterprise customers are reportedly opting for shorter lease times as a result of high-interest rates and companies looking to cut back spending.
DatacenterHawk has noted that while demand in major markets remains strong, power and land shortages are giving secondary markets a boost. DatacenterHawk draws particular attention to Northern Virginia, where companies are now looking at locations such as Atlanta, Georgia, or Columbus, Ohio, and requirements in California are instead being redirected to Las Vegas, Nevada; Salt Lake City, Utah, or Denver.
Planned power across those markets has grown by over 610MW, and increased year on year by 160MW.
LATAM
Latin America, according to DatacenterHawk, is in the midst of a "surge in growth."
According to the analyst, the country has seen a strong influx in the adoption of technology and, while pre-pandemic the region could rely on digital infrastructure in Dallas, Miami, and Los Angeles, this is no longer sufficient.
As a result, hyperscale users have announced and deployed in the region, including Google, Amazon Web Services, Microsoft Azure, and Oracle. Google, AWS, and Microsoft are predicted to each deploy 500MW by 2031 across the region.
Unsurprisingly, this increased demand has also led to a surge in construction. Plans for 400MW in Queretaro, Mexico, and 127MW of capacity in Bogota, Columbia have been announced this quarter.
According to DatacenterHawk, overall the region is expected to have a "larger percentage growth curve" until the needed digital infrastructure is in place.
Europe
In Europe, absorption has similarly fallen to the lowest levels seen since Q4 in 2021, though remains higher than all other quarters in that year.
Many countries across the continent are currently adapting to new policies regarding data sovereignty, privacy, and security. Despite this, the major factor in site selection seems to be the availability of power.
DatacenterHawk pointed to the power supply issues in Amsterdam, where the city threatened to fine data centers that don't impose proper power management and banned all new hyperscale facilities, Dublin (the defacto moratorium), and London, as leading to significant development in areas such as Paris, Milan, and the Nordics.
According to the analyst, some of these secondary markets "grew at a rapid enough pace to create a lack of power and increase development costs on par with primary markets."
Asia Pacific
Finally, in Asia Pacific (APAC), DatacenterHawk has noted significant developments in Singapore and Hong Kong as a result of growing demand for cloud services, and the "economies and connectivity [of these markets] creating ample demand for data center capacity."
The overall development in the APAC region had slowed in the last few quarters, but DatacenterHawk predicts this will turn around in the latter half of 2023.
DatacenterHawk was acquired by Simplify Compliance in August 2022, a company that provides businesses with the latest knowledge and regulatory information. datacenterHawk sits under the company’s telecoms data reporter, CCMI.
