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01 June 2021

The trends behind a booming data center sector

Throughout what has undoubtedly been an exceptionally challenging year for the construction industry, the data center sector has remained resilient. Despite a 10 percent decline in global data center spending in 2020, mainly attributable to inhibited cash flows at the hands of the pandemic, the sector is expected to post 6 percent growth in sectoral infrastructure spending this year (Gartner).

The data center market is projected to grow by €71 billion between 2020 and 2024 in
Europe alone. Demand is certainly robust and continuing to grow, as global internet users spend US$1 million online, send 41.7 million WhatsApp messages, make 1.4 million calls and upload 500 hours of video in a given minute each day.

There are a number of key trends at play within this booming sector, which are explored below:

The green agenda

Clean energy generation and a greener approach to the construction phase are high on the agenda of a number of players in the data center space. It is not surprising that the sector is conscious of its environmental impact against a backdrop of ever-increasing demand – by 2025, data centers may account for 20 percent of the world’s energy use and 5.5 percent of its carbon footprint (Anders Andrae). This is compounded by a number of other factors, including: consumer demand for renewable energy options; the existence of government mandates and tax incentives; and a desire to tackle emissions in a meaningful way – utilizing a low carbon approach, as well as being more mindful of materials and the supply chain.

From an operational perspective, the focus is on optimizing infrastructure, server utilization and energy efficiency, leveraging on-site power generation and storage. The operational carbon impact of a data center can be more than twice the embodied carbon impact, and historically, it is the operational side that has garnered more focus in terms of improving efficiencies and identifying renewable energy sources. However, embodied carbon within the construction phase has certainly come more into focus.

There are a number of opportunities to tackle the sustainability of the construction process, from embracing new practices with no chemicals/by-products to repurposing existing stock rather than building from scratch. Low carbon materials are also particularly topical at present, with a number of interesting initiatives underway – for example, the Buildings as Material Banks project (BAMB2), which is partially funded by the EU, and ‘data passports’ for materials, to create incentives for suppliers to develop more reusable or ‘circular’ materials, whereby the value of the materials is better understood and recorded, to encourage their recovery and reuse.

One of the key considerations with regards to the sustainability ambitions of operators across the sector in the construction phase is that early engagement of the appropriate expertise is fundamentally important to fully obtain value – there are multiple, complex schedule, cost and procurement considerations. The true value is in the transparency and predictability that can be provided – providing accurate information at an early stage to build the business case for an organisation’s C-suite, to facilitate informed decision-making, as there is a balance between cost versus their own green objectives.

Increased focus on security

As COVID emerged and our digital reliance grew, large-scale data breaches have grown, with a 273 percent increase in Q1 2020 (Iomart). As the transition to a more digital lifestyle was thrust upon us, the shift towards the cloud accelerated and there was a pressure to maintain ‘business as usual’ in the face of a global pandemic, security may have taken a back seat for some businesses. Destructive attacks, whereby data or networks are damaged, are up 102 percent, while ransomware is up 90 percent. As confirmed by Tom Kellerman, head cybersecurity strategist at VMware Carbon Black, a cybersecurity firm:

“With the mass shift to remote workforces, the corporate perimeter has been broken. This
is compounded by the reality that most home networks are insecure, and household smart
devices are vectors for attack.”

Providers are increasingly focused on not only physical facility security, leveraging the use of x-rays and biometrics, but also offsetting the risk of cyber breaches as edge data centers continue to increase in popularity.

The emergence of secondary data center markets

We are seeing the secondary global data center markets thriving across Europe, alongside the continued success of the FLAP-D markets (Frankfurt, London, Amsterdam, Paris and Dublin), which have over 500MW of capacity under construction. As well as driving workloads towards the edge, and typically providing greater margins, they often offer tax incentives to data center providers and more affordable land opportunities, better suited to large-scale facilities.

The proliferation of hyperscale

Large-scale facilities are expected to dominate the market over the coming years, reaching US$23.3 billion by 2024, with smaller scale data centres growing to just over $7.2 billion. Over the last two years, 111 new hyperscale facilities were completed, and in spite of the
challenges posed by COVID, 52 of these were in 2020.

As we continue to place huge demand on our digital infrastructure, it is easy to see why hyperscale is seen to be the way forward, with 2.1 million new racks expected between the end of 2020 and 2025. Ultimately, they are considered to be more sustainable than other facility types in terms of supporting this demand.

Harnessing AI and ML for higher utilization

The use of artificial intelligence (AI) and machine learning (ML) within the data center space is not a new concept, but the application continues to broaden. From the benefits with regards to temperature regulation to maintain the required cool environment, to equipment monitoring to flag issues early, these technologies offer a host of benefits, and many facilities are now deploying AI and ML workloads.

Furthermore, AI and ML can support increased rack density, and with the abovementioned increasing demand, there is pressure with regards to utilization, which has led to an increase in global rack density to an average of 6-8kW (Arizton), although some highly developed markets are operating at 10-12kW.

Overall, the sector is expected to record considerable growth over the coming years, as outlined above, driven by the abovementioned factors. The construction industry and sectoral stakeholders must work closely together to service the growing demand, building facilities that can support the ever-increasing reliance on data and digitization.  

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