Data Center Outlook
H2 2021
Despite headwinds, the sector continues to record strong fundamentals supported by robust record-level demand
Quick takes:
- Demand reaches yet another record in 2021, led by large cloud and tech company expansions
- M&A hit new heights with record-breaking acquisitions in 2021
- Goals for sustainability make way as metrics evolve
- The global construction pipeline remains robust
Data center sector hits new heights
Despite significant supply chain disruption from the pandemic and the Omicron surge, the data center sector was buoyed by multiple billion-dollar deals in 2021. These mega deals enable prominent players with strong financing to scale rapidly and allows them to enter new markets across regions.
The performance of top major data center REITs, which are the major operators and providers of data center space globally, reflects the reentry and reopening of economies. Residential and retail recorded the highest returns in 2021, while the combination of remote work, projected increases in IT spend, and even e-sports, have contributed to robust demand.
Meeting green goals
As major multinational companies across industries strive to meet and exceed Environmental, Social, and Governance (ESG) goals outlined in annual sustainability reports, data center operators must complete their own targets while helping customers exceed theirs.
There are various metrics that operators are using to track factors like data center power consumption, carbon emissions, and electronic waste. PPA (Power Purchase Agreement), REC (Renewable Energy Certification), and CCA (Community Choice Aggregation) are popular methods for data center operators to enhance their renewable energy portfolios and lower their carbon footprint.
Global state of the industry
Demand for data centers reached yet another record in 2021. Scroll to see regional performance.
In the United States, absorption reached a mammoth total of 885.7 MW across 14 domestic markets, a 44.3% increase year-over-year.
Absorption (MW) by U.S. market, YE 2021
Core markets in Europe met earlier projections and recorded 219.3 MW in absorption, and preleasing activity has picked up across Frankfurt and Paris.
Absorption (MW) by EMEA market, YE 2021
The global construction pipeline hit a new record in 2021 despite supply chain disruptions and project delays. The pipeline in the United States remained strong, while the European pipeline decreased about 34% year-over-year. In India, Mumbai leads the way in development, driven by significant land acquisitions by hyperscalers in 2021.