Worldwide Data Center Market - Investment Prospects in 9 Regions and 51 Countries

MARKET OVERVIEW

The worldwide data center market was valued at USD 215.73 billion in 2022 and is expected to reach USD 289.66 billion by 2028, growing at a CAGR of 5.03% from 2022 to 2028. The market is driven by the rapid expansion of cloud service providers, increased demand from content and network providers, on-premises migration to cloud/colocation facilities, government initiatives toward digitalizing the economy, etc. The growing popularity of IoT, Big Data, the emergence of 5G networks, favorable government policies, free cooling, and climatic conditions are among the major factors driving the growth of the data center market.

North America and Western Europe are among the mature and developed markets in data center development. APAC countries such as China, Japan, Singapore, Australia, and others are among the advanced market with the presence of all the global data center operators. Countries such as India, Malaysia, Indonesia, Hong Kong, and others are witnessing growth in terms of development from several new operators entering the data center market.

Hyperscalers such as Meta (Facebook), Microsoft, Google, and Amazon Web Services are actively involved in expanding their presence in existing locations across the U.S. and are expanding to other countries apart for the United States. The Nordics region is also among the preferred location by the hyperscalers to develop data center facilities owing to the free cooling solutions, availability of renewable energy, district heating systems, and others. Some major colocation operators involved in the investment in 2022 include Equinix, Digital Realty, QTS Realty Trust, Iron Mountain, Vantage Data Centers, NTT Global Data Centers, STACK Infrastructure, CyrusOne, ST Telemedia Global Data Centres, AirTrunk, GDS Services, VNET Group, and others.

Some trends and enablers that will contribute to the growth of the data center market worldwide include:

• Adoption of advanced IT Infrastructure
• Increase in rack power density
• A surge in demand for cloud-based services
• Growing submarine and inland connectivity with other countries and regions
• 5G connectivity and edge data center development
• Sustainability measures to reduce emissions from data centers
• Automation & Intelligent Monitoring Solutions

KEY HIGHLIGHTS/ TRENDS

Adoption of Advanced IT Infrastructure
The data center market has witnessed several new trends in adopting IT infrastructure in data centers. Some trends include the adoption of ARM-based architecture, the adoption of NVMe storage devices, the adoption of converged and hyper-converged infrastructure, the adoption of 200/400 GbE ports, and others. ARM technology is also being adopted by cloud providers such as Microsoft, Amazon Web Services, and Oracle, which have been running ARM-based chips in their data centers. Some leading vendors that offer NVMe storage options include Hewlett Packard Enterprise, Hitachi Vantara, Dell Technologies, NetApp, IBM, and Pure Storage.

Focus On Improving the Sustainability of Data Centers
The increasing data center power consumption and the need to decrease carbon emissions have prompted many service providers to purchase clean, renewable energy sources to power their current and new facilities. There is a high interest in adopting renewable power sources among global and local data center operators. Also, many smaller operators are installing solar panels on the rooftops of their facilities to power the data centers.

Innovative and Sustainable Data Center Power Technologies
Several data center operators are upgrading their data centers from traditional technologies to new ones. Such new technologies will also help companies focus on sustainability in the data center market. Some such innovations are as follows:

• Adoption of advanced UPS batteries such as Lithium-ion, Nickle-Zinc, and Prussian Blue sodium-ion batteries replacing lead-acid batteries
• Software-Defined Data Centers (SDDC) and AI in power monitoring
• Microgrid adoption in data centers, majorly among hyperscalers
• Floating data centers, underwater data centers, snow-cooled data centers, and boiling liquid for cooling data centers
• Replacing diesel generators with natural gas, hydrogen fuel cells, & hydrotreated vegetable oil (HVO).

Ai-Based Infrastructure Boosting Liquid Immersion and Direct-To-Chip Cooling Solutions
The liquid cooling will witness massive growth among data centers that deploy AI & ML workloads. These technologies require powerful computing capabilities for TPU, where the heat generated exceeds the cooling limit and thus demands superior efficiency to keep the chips working optimally. For instance, most upcoming data center facilities will include at least one data hall to support the deployment of advanced two-phase immersion cooling and direct-to-chip cooling solutions. Meta (Facebook) has announced its plan to pause several new and expansion projects across the U.S., as it wants to create a new AI design for the facilities.

Government Support to Develop Data Centers
Over the past few years, the data center market growth has been focused on countries offering tax incentives. Many state and local governments provide investments and sales tax incentives to attract operators. The U.S. is leading in providing tax incentives to data center operators. Several states in the U.S. provide tax incentives to data centers for investments, job opportunities, and compensation for employees. Several states in India have launched their own data center policies to attract investment and create a global hub for data center facilities. Some of the states in India that have announced their data center policies include Telangana, Uttar Pradesh, West Bengal, Karnataka, Tamil Nadu, Haryana, and Odisha. 

Impact of Supply Chain Disruptions
Supply chain disruptions are a major challenge faced by data center developers recently. With the onset of COVID-19, supply chain disruptions increased, leading to a shortage of infrastructure such as power equipment, cooling infrastructure, chips, and other infrastructure. Also, political instability and disturbances between Russia and Ukraine led to a price hike in energy and fuel costs. One of the major shortages faced by operators was chip shortage, which led to a decline in the manufacturing of several infrastructures.

SEGMENTATION ANALYSIS

Facility Type

• In 2022, over 31.5% of the overall power capacity addition in the global data center market was carried out by hyperscalers such as Meta (Facebook), Google, Microsoft, and Amazon Web Services.
• The investment by hyperscalers such as AWS, Google, Meta (Facebook), and Microsoft are majorly concentrated in the US region. However, the operators are moving from the U.S. to the European and APAC regions.
• The colocation operators are continuously expanding their presence across the existing markets and are also involved in entering several new markets.
• Enterprise data center investments were identified to be mostly modular and on-premises worldwide. The majority of these projects support a capacity of

Data Center IT Infrastructure

• The data center server market is witnessing high growth in high-density servers. The most adopted servers in the industry include rack and blade servers from vendors such as Cisco Systems, Intel, Fujitsu, Hewlett Packard, Dell Technologies, IBM, and Lenovo.
• The data center storage market is currently dominated by HDD adoption, with around two-thirds of the market adopting the technology, with key vendors such as Seagate Technology, Pure Storage, Western Digital, Toshiba, and others offering several storage infrastructures.
• With the development of cloud data centers, the adoption of switches with ports varying from 25−100 GbE across multiple layers of the data center architecture will increase. Small data center facilities will migrate from 1 GbE to 10 GbE switches at ToR layers.

Data Center Electrical Infrastructure

• The emergence of microgrids and on-site power generation systems has led to increased energy storage and sustainable energy, thereby leading to increased savings and improved resiliency.
• Data center operators are focused on adopting advanced UPS batteries such as Lithium-ion, Nickle-Zinc, and Prussian Blue sodium-ion batteries. The adoption of Lithium-ion batteries is witnessing strong demand among operators.
• The cost of maintaining diesel generators and reducing carbon emissions is very high. Operators are switching from diesel to vegetable oil-based generators. Operators such as Compass Datacenters, Interxion (Digital Realty), Kao Data Centers, Ark Data Centers, and others are using HVO fuel as a replacement for diesel.
• Incorporating modular power infrastructure will likely provide higher OPEX savings for data centers over time as they are more efficient, require lower maintenance, and reduce space.

Data Center Mechanical Infrastructure

• In terms of cooling systems, free cooling techniques have grown significantly over the last few years across regions with favorable climatic conditions that can use evaporative/adiabatic coolers for data center cooling purposes.
• In data center projects, the investment in cooling systems is expected to be 15−20% of the overall cost, depending on the facility design and IT load. The selection of cooling systems is based on the location, i.e., whether the climatic conditions favor free cooling and have abundant water resources.
• The procurement of 45U-48U rack cabinets will increase, with more OCP-ready colocation facilities supporting OCP-rack architecture.

Data Center General Construction Services

• Apart from construction, installation, and commissioning services, data centers also invest in improving physical security, monitoring, and management of facilities through data center infrastructure management (DCIM) on a real-time basis.
• The average general construction cost across the U.S. in 2022 was between USD 8 and USD 9 million per MW. However, the cost might change based on locations, increases in commodity price, inflation, and supply chain constraints.
• The importance of monitoring is growing with the adoption of intelligent real-time monitoring software with automation and AI features that can predict maintenance requirements, component failures, and automatic switchovers for uninterrupted operations.
• Supply chain constraints have increased the data center construction and procurement cost, averaging USD 2 - USD 3 million per MW.

GEOGRAPHICAL ANALYSIS

Americas Region

• The availability of tax incentives, free cooling solutions, renewable energy, and low cost of industrial land and power will drive operators to invest in the Americas region.
• The Americas region is among the world's most mature data center markets. The North American region, which includes the U.S. and Canada, leads the market in terms of investment, white floor addition, and power capacity addition.
• Brazil is considered among the developed markets in the Latin America region, with other countries such as Mexico, Chile, and Colombia among the emerging locations in the region.
• Hyperscale operators are likely to continue to invest in the US regions. Colocation operators will also continue to expand their market share across the region.

European Region

• Data protection laws such as the implementation of GDPR, availability of free cooling solutions, district heating systems, availability of renewable energy, and others are among the major factors that will attract operators to invest in the European region.
• The FLAP-D markets are developed and established data center markets in Western Europe. However, implementing a moratorium across the Netherlands and Ireland region might slow the investment in the next 2-3 years.
• Spain, Italy, Switzerland, and Belgium are among the emerging locations for data center investments across the region. These countries have a higher potential to attract hyperscalers to invest in the market.
• The Nordic region is among the preferred regions in the European region by hyperscalers owing to the availability of free cooling solutions throughout the year and renewable energy sources.
• Denmark witnessed the highest investment in the Nordics in 2022, followed by Sweden, Norway, Finland & Iceland. Denmark & Sweden are expected to be the highest contributors in the Nordics region during the forecast period.
• 2022 has been a turbulent time for Russia considering the political climate in the country, which is expected to impact the business environment, including data center investments, especially by global companies.
• However, the instability in Russia provides an opportunity for other countries in the Central & Eastern region. Poland is witnessing a boom in the data center market and several investments from global colocation operators.
• Austria is also among the emerging locations in the Central & Eastern European market. Local data center operators dominate the Czech Republic market.

Middle East & Africa (MEA) Region

• Increased internet & social media penetration, digitalization initiatives, migration from on-premise to cloud, colocation, and managed services are among the factors driving the data center market in the MEA region.
• The UAE and Saudi Arabia are the top destinations for the data center market in the Middle East region. Gulf Data Hub and Khazna Data Centers are among the top colocation operators investing in the market.
• Other countries such as Israel, Kuwait, Qatar, Oman, and Bahrain are also witnessing investment and are among the emerging locations in the Middle East region.
• South Africa, Kenya, and Nigeria are the top data center markets in the African region. Several global colocation operators are entering these markets through M&As.
• Some emerging locations in the African region include Egypt, Ethiopia, Morocco, Ivory Coast, and others. These regions are expected to witness investments during the forecast period.

APAC Region

• The APAC region is among the world's most dynamic and fastest-growing data center markets. The region has established and developed markets such as China, Australia, Japan, and Singapore.
• India is likely to be among the top destinations for the data center market in the APAC region owing to the deployment of 5G and the surge in internet & social media penetration aided by several digitalization initiatives.
• Several emerging locations include Indonesia, New Zealand, the Philippines, and Malaysia. South Korea is witnessing high investments from local and global colocation operators.
• The imposition of a moratorium on Singapore due to the scarcity of land and power affected the market severely. However, the ban was lifted, and data center projects will get approval phase-wise.
• The APAC region is the most exciting market and will provide ample opportunities for support infrastructure providers and contractors.

VENDOR LANDSCAPE

Data Center IT Infrastructure Providers

• Vendors such as Arista Networks, Cisco Systems, Dell Technologies, Hewlett Packard Enterprise, IBM, Huawei Technologies, NetApp, Lenovo, and others are among the top IT infrastructure providers in the global data center market.
• The IT infrastructure market has changed over the last few years, with the increased construction of self-built data centers by hyperscale operators and expansions and new projects by colocation operators.
• Some of the new trends in the IT infrastructure include the adoption of ARM-based architecture, the adoption of converged and hyper-converged infrastructure, server virtualization, the adoption of 200/400 GbE ports, and others.

Data Center Support Infrastructure Providers

• Vendors such as Schneider Electric, Rittal, Hewlett Packard Enterprise, and Delta Power Solutions provide infrastructure based on OCP design in the global data center market. This will aid in market revenue growth for these vendors, as many organizations prefer solutions such as 48V DC UPS systems.
• The colocation providers are undertaking the construction of facilities in a phased manner, depending on the market demand. Over the next few years, there is expected to be more demand for higher capacity systems in the redundancy configuration of 2N for power infrastructure across multiple facilities.
• Operators prioritizing innovations and sustainability will attract more customers and have a higher market share.

Data Center Construction Contractors

• The surge in data center activities worldwide will be a major source of revenue for construction contractors. Some prominent construction contractors include AECOM, Arup, Corgan, DPR Construction, Fortis Construction, Holder Construction, Jacobs, Turner Construction, Syska Hennessy Group, RED Engineering, and Turner & Townsend.
• The availability of a skilled and qualified workforce continues to be a major challenge for operators and construction contractors.
• Designing a data center can cost around 4%–6% of the total investment, depending on the size and capacity of the facility and labor cost.

Data Center Investors/Operators

• The major hyperscale operators investing in the data center market include Amazon Web Services (AWS), Microsoft, Meta (Facebook), and Google.
• The major colocation operators that are active in the data center market include Equinix, Digital Realty, Switch, QTS Realty Trust, Iron Mountain, DataBank, Vantage Data Centers, CyrusOne, NTT Global Data Centers, Compass Datacenters, and others.
• The data center market also witnessed several new entrants in the market, such as AUBix, Corscale Data Centers, Edge Centres, Evolution Data Centres, Global Technical Realty, iMCritical, Yondr, Power House Data Centers, YCO Cloud, Stratus DC Management, Quantum Loophole, others.
• Rapid expansion plans by global operators include M&A activities. For instance, AdaniConneX is a JV data center firm between India-based Adani Group and edge data center firm EdgeConneX.