MARKET INSIGHTS

The U.S. data center construction market size was valued at USD 20.13 billion in 2021 and is expected to reach USD 24.70 billion by 2027, growing at a CAGR of 6.99%. The U.S. is the most mature data center development and operations market. The growing popularity of IoT, the emergence of 5G networks, and the demand for streaming online entertainment content at high speeds are the significant factors driving the growth of the data center construction market in the US.

Increasing data traffic has created additional demand for developing many data centers that support data generated by businesses and consumers. The use of cloud computing services and applications will continue to grow in the US, further developing large hyperscale cloud-based centers. Some preferred locations by operators in the US are Virginia, Texas, California, Illinois, Georgia, Oregon, Nevada, Arizona, and Ohio. Virginia and Texas are the leading states in data center investments in 2021.

U.S. DATA CENTER CONSTRUCTION MARKET OPPORTUNITIES

• The US has emerged as the most prominent cloud market in the world with the presence of major global cloud operators. The wide adoption of cloud services has increased the country's need for data center construction.
• There is increased growth of hyperscale facilities in the US, such as Facebook, Microsoft, Amazon Web Services, Apple, and Google. In 2021, about 27 hyperscale data centers began operations or were under construction in the US.
• The modern data center is based upon Tier standards to evaluate facilities based on the efficiency, performance, and redundancy of the infrastructure the Uptime Institute gives. Other standards for construction include LEED Certification, TIA 942, and ANSI/BICSI 002-2019 certifications.
• The Western US expects to dominate the market in terms of overall investment during the forecast period, garnering over $6.6 billion. However, the South-Eastern and Mid-Western US will compete with the Western US regarding investments and the number of projects during the forecast period.
• Cloud expansion in the US involves a mix of colocation & self-built workloads. Collectively, colocation operators and investments are boosting the region's growth of data center construction.
• The construction of data center in the US is growing substantially, with leading service providers investing significantly in new developments and expansions. There has been significant growth in M&A under Joint ventures, which have positively impacted the construction market's growth.

KEY TRENDS DRIVING THE MARKET

Impact of Cloud Connectivity 

• After the COVID-19 outbreak, there was a growth in cloud services in the United States data center market as enterprises shifted their workloads to the cloud infrastructure. For instance, YouTube migrated its infrastructure to the cloud.
• Many hyperscale facilities are being built, enabling cloud service providers to expand their cloud region across the US.
• Government agencies have migrated their applications to a private cloud environment where cloud service providers operate.
• Major regional cloud service providers plan to collaborate to provide cloud-based services. Collaborations with the new entrants to colocate their workloads with the existing colocation operators.
• The growing use of cloud computing applications and services in the US will aid in developing cloud-based hyperscale data centers.
• The economy projects will increase due to the investments paving the way for more construction projects across the states.

Big Data & IoT Driving the Market Growth

• The US is one of the major hubs for IoT and big data, where most data is being generated. As a result, the deployment of hyperscale investment was witnessed in the country to keep the data secured.
• There is a high internet penetration rate in the US, i.e., around 85%, which increases the amount of data generated. Also, the country contributes over 50% of the world's spending on big data and analytics solutions.
• In August 2021, AT&T and Cisco partnered to launch 5G services to boost performance for Internet of Things (IoT) applications across the US.
• Metaverse is gaining popularity allowing the users to connect via VR (Virtual Reality) and AR (Augmented Reality), generating vast amounts of data using connected devices such as mobile phones & computers.
• The adoption of IoT will drive the demand for edge data center construction requiring low latency with high computing capabilities.

Rising Colocation Investments

• Prominent investors in the US include Equinix, Digital Realty, CyrusOne, Google, QTS Realty Trust, Vantage Data Centers, and NTT Global Data Centers.
• In February 2021, A 36MW IT load facility was launched by NTT Global Data Centers in Hillsboro, Oregon.
• In May 2021, TA Realty announced its plan to develop a 300MW data center campus in Loudoun County, Virginia, spanning 1.5 million sq. ft.
• In April 2021, the Construction of a 240MW data center campus was started by NTT Global Data Centers in Arizona.
• In April 2021, Construction of a 48MW facility named ORD-1 was commenced by Aligned, which will be expandable to 60MW.
• An increase in investments will help provide revenue opportunities to construction contractors and infrastructure providers worth billions of dollars.

Tax Incentives Boosting Construction Market

• One of the essential enablers for the data center construction market is tax incentives and breaks offered in states and countries across the US, which helps yield high savings while incorporating other specified benefits.
• Rhode Island has passed an act for exception from property and sales tax for 50 years for data centers fulfilling the criteria.
• Tax relief of around $150 million was offered to Facebook by Utah’s local community for 20 years.
• In 2020, Michigan approved $20 million under tax incentives for Switch Data Centers for data center construction.
• A Data Center Investment Program was established in Illinois to provide local and state tax exemptions to the operators and owners.

COMPETITIVE ANALYSIS

• The market consists of contractors, architectural and engineering firms, physical security vendors, and DCIM service providers. With the growing construction of hyperscale facilities, revenue opportunities for construction contractors are high as several centers are developing. Some major construction contractors operating in the market include AECOM, DPR Construction, Corgan, Turner Construction, and Jacobs and Holder Construction.
• Construction contractors collaborate with infrastructure vendors to provide modular infrastructure solutions, helping them manage costs and scaling. Manufacturers such as Huawei offers prefabricated modular facilities such as FusionDC1000B, which can be small or medium-sized and incorporate Artificial Intelligence.
• The increasing number of cloud regions will benefit construction contractors, infrastructure providers, architectural and engineering firms, and others.
• Vendors are focusing on the regions with the lower labor and land costs while confirming the data center construction specifications are followed.
• The market competitiveness will be increased by the high costs of modern security systems being procured. At the same time, the DCIM/BMS solutions will remain competitive for decreasing the OPEX of the facility.