Data Center Market Trends

Data Center Market Drivers

The rise of cloud computing, IoT, AI/ML, and 5G/6G is rapidly transforming the data center market, reshaping operations and driving innovation.

• The data center market worldwide is transforming very quickly due to the fast-growing adoption of cloud computing, Internet of Things (IoT), artificial intelligence (AI), machine learning (ML), and the use of advanced wireless technologies such as 5G and upcoming 6G networks. These technology advancements are transforming the data center ecosystem, changing the very core of business operations, supporting innovation, and catalyzing unprecedented market growth. Perhaps the most powerful driver of this change is increasing demand for AI functionality, which is redefining the power consumption patterns of data centers. Our research indicates AI-related power demand will grow around 200 TWh during the period from 2024 to 2030, with AI contributing around 20% of all data center power usage by the end of the decade. Transaction numbers and investor appetite for data centers continue to be strong, fueled by increasing digital infrastructure demands and the critical significance of cloud services.

Transaction volume and investor interest in data centers remain high, driven by rising digital infrastructure needs and the vital role of cloud services.

• Transactions of North American data center assets in 2023 totaled $4.8 billion 29% Year on Year growth emphasizing their strategic significance with increasing dependence on cloud computing, artificial intelligence, and working from home. Next year, 2024, is likely to witness increased capital market activity courtesy of strong development pipelines and favorable lending conditions. Yet, supply limitations and elevated pre-leasing demand are testing the buyers. As of May 2024, the worldwide market reported issuances of $4 billion of asset-backed securities (ABS), with borrowing prices from 150–250 basis points over risk-free rates. The numbers indicate both the stability of the sector as well as the growth opportunities. Large players such as Blackstone, TPG Real Estate, Brookfield, and Realty Income have stayed busy, indicating ongoing investor appetite for the data center sector in spite of macroeconomic volatility.

Data Center Market Restraints

Power and Thermal Management for High-Density AI Clusters in Data Centers

• The explosive growth of AI clusters with extreme power density is transforming the design of data centers.

• These clusters, necessary for the training of sophisticated machine learning models, require power loads in the range of hundreds of kilowatts—well beyond conventional limits of infrastructure.

• Most current data centers, built to handle less than 10kW per rack, cannot cope with such loads with their limited power and cooling capabilities. SkyQuest's report highlights the importance of careful feasibility studies prior to retrofitting. Old-fashioned "eye-ball" planning methods are not adequate; accuracy engineering is required. The heightened variability in AI workloads brings in uncertainty in power consumption, and peak-to-average loads are frequently underestimated. This underestimation can lead to overheating, equipment failure, or downtime. Proper power profiling and solid thermal management are now imperative. With the growing significance of AI, making data centers future-proof through creative design and infrastructure revamps is critical for sustainable and scalable AI execution.

Water Scarcity and Regulatory Pressure Disrupting Data Center Cooling Operations

• The worldwide data center market is further confronted by rising city-level limits on water consumption, derailing cooling processes and sustainability objectives. Examples include California, Singapore, Spain, the UAE, and Australia, where increasing digital infrastructure demand taxes local water supplies. In Spain, the government is examining water-hungry cooling techniques, with Phoenix and Mesa cities rejecting new data center permits in Arizona over water worries. Data centers that use enormous amounts of water for cooling are now unsustainable in water-poor regions. Previously energy-efficient by nature, operators are turning to water-frugal approaches—moving to closed-loop and air-cooled systems or utilizing ambient air and natural water bodies. Industry titans Google, Microsoft, and Meta have committed to achieving water-positivity by 2030, indicative of an industry-wide transition toward comprehensive resource management. With water sustainability becoming an important consideration, data centers need to develop innovative cooling solutions to meet environmental and regulatory demands.