Power availability stymies data center growth

The chief obstruction to data center growth is not the availability of land, infrastructure, or talent. It’s local power, according to commercial real estate services company CBRE 

In its 2023 global data center trends report, CBRE says the market is growing steadily and demand is constantly rising, but data center growth has been largely confined to a few select areas, and those areas are running out of power.

No region embodies this more than Northern Virginia, which is the world’s largest data center market with 2,132 megawatts (MW) of total inventory. Its growth happened for a couple of reasons. First, proximity to the US federal government. Second, because there’s a major undersea cable to Europe in Northern Virginia, and data centers want to be as close to it as possible to minimize latency.

Lately, however, Northern Virginia has been losing its appeal. Residents are fed up with monstrous data centers, many the size of a football stadium, destroying rural scenery. 

The CBRE report looks at many variables, including total inventory, vacancy rates, and pricing and rental rates, in established and emerging markets worldwide. While there are many issues to consider, available power supply is a problem in every region of the world.

Singapore is considered the world’s most power-constrained data center market with less than 4 MW of available capacity, which is very scarce. Google regularly builds individual data centers that have a much higher power draw. Other power-constrained regions include Frankfurt and Tokyo.

Complicating the matter is the emergence of sustainability requirements. Companies are being pressured to reduce their power consumption and rely on renewable energy, which is not as available as traditional power. At the same time, new chips from Intel, AMD, and Nvidia draw more power than ever before, so they aren’t helping one bit.

The lack of data center space translates to a lack of capacity for customers. CBRE says there is a worldwide shortage of available supply, with just 2% or less available rental space. This matches earlier research from datacenterHawk, which put capacity in Q1 at 2.8%.

The lack of capacity, not surprisingly, is leading to price increases. The report finds that Singapore has the highest rental rates at $300 to $450 per month for a 250- to 500-kilowatt (kW) requirement, while Chicago has the lowest at $115 to $125. Chicago also had among the best vacancy availability, with 6.7%. But that was down from 8.2% a year earlier.

The report states that the Dallas/Ft. Worth region remains one of North America’s most popular markets for data center development, with 323.9 MW of capacity under construction. Last year saw an 850% increase over the normal leasing activity in Dallas. Also, total inventory rose 17% year-over-year. The result is that the Dallas/Ft. Worth market has passed Silicon Valley as the nation’s second-largest colocation data center market.

Not surprisingly, CBRE finds that the rapid growth of artificial intelligence has contributed to steady leasing activity and is expected to drive future data center demand. “This will spur innovations in data center design and technology as operators aim to deliver the capacity that meets the increased power density requirements of high-performance computing,” the report stated.

While the report didn’t come right out and say it, the innovations it is likely referring to have to do with liquid cooling, because AI processing runs extremely hot and air cooling is simply not sufficient to handle it.