According to the Los Angeles Times, estate developers "are having a hard time keeping up with demand, as businesses in search of secure spots for their servers rent nearly every square foot that becomes available."
According to a recent report by real estate broker JLL, the construction of new data centres is at "extraordinary levels" driven by "insatiable demand. "
The biggest drivers are AI and cloud service providers, including some of the biggest tech names, such as Amazon, Microsoft, Google, and Oracle.
With occupancy in conventional office buildings still down sharply following the impact of the COVID-19 pandemic and property values falling, data centres represent a rare, ripe opportunity for real estate developers who are pursuing opportunities in major markets like Los Angeles and less urban locales that are served by plentiful and preferably cheap power needed to run data centres.
The JLL data centre report said construction is occurring at an "extraordinary" pace nationwide and still not keeping up. Data centre vacancy declined to a record low of three per cent at midyear due to insatiable demand and despite rampant construction.
Development increased more than sevenfold in two years, with the pipeline of new projects levelling off in the first half of 2024, a potential signal that the US power grid cannot support development faster.
But when projects currently under construction or planned are complete, the US colocation market, in which businesses rent space in a data centre owned by another company for their servers and other computing hardware, will triple in size from current levels... Real estate investors and landlords are being drawn into the market because tenant demand is high, and they are likely to renew their leases after shouldering the costs of setting up data centres.
The mother of all data centres is a 30-story building where "thousands of miles of undersea fibre-optic cables disappear into an ordinary-looking office tower."
A law firm that had been in the building more than 50 years cleared out five floors that will quickly be re-leased to data tenants.
Two elevators were removed so the empty shafts could hold water pipes used to help keep the temperature cool enough for the heat-producing servers." Developers are happy rents "can be double what they are at newer downtown office high-rises.
Goldman Sachs analysts say that by 2030, data centres could account for as much as 11 per cent of power demand — up from three per cent now.