For the past six years, data center power consumption has been steadily rising to match the increase in demand driven by technological advancement.¹
A data center is a large temperature-controlled, secure facility that houses servers that store, process, and retrieve data for consumers, businesses, and more. A few key technologies and industries that require data centers to function are:
AI and machine learning
Cloud computing and storage
E-commerce
Online Gaming
Business applications (CRMs, ERPs, email servers, and more)
5G centers
This presents a unique opportunity for commercial real estate, as Goldman Sachs² predicts that demand for data center power will double by 2030, driving $50 billion of capital investment into power generation capacity. With this increased power usage comes a greater demand for data centers and additional servers within the centers.
The United States is the No. 1 provider of data centers in the world, and research suggests that isn’t going to slow down. In fact, the US houses more data centers than the sum of the nine countries that comprise the top 10.³
That said, investing in data centers doesn’t come without its own risks, such as limited power availability,⁴ hiring challenges for qualified talent,⁵ and shortages in semiconductor materials.⁶ If you’re considering taping into the data center real estate market, continue reading to learn more about what makes data centers so different, where they need to be located, and the various types of data centers that are constructed across the United States.
What Makes Data Centers Special?
If you own a desktop or laptop computer, you may already know how hot a computer can get. Even smartphones can significantly heat up as you use them. Why is this?
As a computer processes more information, it needs more power to function. This power comes in the form of electricity, which also generates heat.
Data centers house computers that are designed to store and process data for their owners or clients. If you were to go inside a data center, you’d find a highly secure environment where hundreds and hundreds of server racks sit in a cool, temperature-controlled environment.
In this 5-minute video from Google, you can see what a data center in South Carolina looks like, plus a few employees describe their jobs at data centers.
Servers inside a data center are just very large computers that hold a lot of storage. The more processes they perform, the more electricity they need, and the more heat that’s generated. This wouldn’t be a problem except that heat can damage crucial components within computers if not addressed, leading to information being lost, damaged, and expensive equipment needing replacement. Therefore, the temperature of the data center has to be carefully controlled alongside maintaining the components of all the different servers within the facility. Data Centers by the Numbers
The United States is #1 in data centers across all countries, according to the Data Center Map.⁷
Worldwide, the average data center is 100,000 square feet, but a few large data centers skew this average due to being several million square feet. Smaller data centers are 5,000 to 20,000 square feet.⁸
Data centers consume roughly 1,000 kWh per square meter.⁹ Compare this to office buildings, which consume 218 kWh per square meter.¹⁰
HVAC systems are one of the highest costs for data centers due to the heat load that results from the high density of servers inside the center.
With these stats, we can start to understand the larger picture of data centers. Data centers are in high demand, but have to be carefully constructed to be:
Secure
Temperature-controlled
Efficient
On a power grid that can handle the high energy usage
Preferably, in locations that are at low risk for natural disasters like hurricanes, earthquakes and fire
Where Do Data Centers Need to be Located?
The location of a data center is a careful balance among a lot of factors.
Power Supply: Because of the unique energy requirements of data centers, they need to be in a location that has access to a lot of power. This power also needs to be stable, cheap and redundant.
Security: Data centers have a lot of expensive hardware and equipment, so they need to be in a secure location.
Geological volatility: Data centers can’t be built on unstable ground or areas with extreme weather conditions like tornados, hurricanes, or floods. Data centers are a big investment, and unstable geology is an unnecessary risk.
Construction costs: Data centers require very intentional construction, with a lot of knowledge of how to build the facility to be energy-efficient. Therefore, proximity to construction materials and talent is a major factor.
Latency: Because data centers are actively used by consumers and businesses, it makes sense to locate the data center somewhere near those businesses to reduce the latency, or delay, that it takes to retrieve information from the servers inside the facility.
Climate and cooling: Because the HVAC is such a large part of the data center’s cost, it’s worth considering the overall climate of the location of the data center. Humidity and higher ambient temperatures can lead to higher operational costs per square feet. More advanced data centers also actively use water to cool the facility, so proximity to a water source may be needed.
Although a single location is unlikely to meet every single requirement for optimal performance, keep in mind that every factor not met will lead to some form of financial impact on the data center. A suboptimal location may not be viable to investors, which can be dangerous for the project.
Types of Data Centers
Hyper-scale
This is a larger data facility that can support, store, and process data, usually for IT infrastructure. Most hyper-scale data centers are owned and operated by the company that the facility supports. Amazon, Microsoft, and Google own a lot of hyper-scale data centers. The main difference between hyperscale vs. colocation (described next) is ownership.
Colocation
Sometimes referred to as multi-tenant data centers, these spaces are meant for businesses and companies that don’t want to build their own data centers. A company leases a certain amount of “space” within the facility from another organization that owns and operates the colocation data center. These facilities are in high demand, but have high upkeep costs due to the high expectations and level of security required by clients.
Enterprise
Enterprise data centers are data facilities, sometimes smaller, that are owned and operated by companies to store their own data. Unlike hyper-scale data centers, enterprise data centers don’t have to be thousands of square feet. These data centers are usually located next to or near the business’ offices for convenience and security.
Managed
This data center is similar to a colocation, where a third party operates the data centers and leases out space. The main difference is that managed data centers provide other IT services related to data management and cloud computing.
Edge data center
Also sometimes called microdata centers, these facilities are designed to be located directly near the people who use their services. Because of this, micro centers can’t prioritize facility size. For instance, 5G centers are examples of edge data centers. Data Center Standards
Within the data center industry, there are four tier classifications, depending on the business function, resilience, and capacity of the facility. The Uptime Institute maintains this tier system. Here’s a brief overview of the data center standards:¹¹
Tier 1
Basic infrastructure for office IT support. This facility has one power, cooling, and network with no backup systems. In the event of a repair or maintenance, the facility may have to shut down completely.
Uninterruptible power supply (with a UPS)
IT systems
Dedicated cooling equipment
Engine generator in case of power outages
Tier 2
Redundant capabilities for power and cooling. Better maintenance opportunities and precautions against service disruption. A tier 2 center can have select maintenance performed with no impact on the service.
Backup generators
Energy storage
Cooling units
Fuel tanks/cells
UPS modules
Tier 3
The entire capability of the facility is redundant with maintenance available for any part of the system. Tier 3 systems have multiples of each component in the tier 2 system. However, a tier 3 data center is still a single facility.
Tier 4
Several independent, isolated facilities act as redundant (“backup”) in case one facility fails. If there’s a failure or interruption in one of the facilities, there are no issues with the rest of the system. Tier 4 data centers also have separate power lines to get power from multiple sources.
These tiers are most commonly seen in colocation data centers where space is rented, as enterprise or hyper-scale data centers don’t feel the need to certify their own data centers.
Biscred Connects You With Data Center CRE Companies
Biscred’s vast database of companies and professionals working in commercial real estate includes over 4,400 companies and more than 191,000 professionals with specialization or experience in data center real estate.
The companies are located in the following regions of the U.S.; note that this refers to the companies’ locations, not to the data center locations.
Midwest: 960 companies
Northeast: 1,247 companies
Southeast: 1,229 companies
Southwest: 849 companies
West: 1,194 companies
This is the breakdown of what the companies do, in terms of their overall service offerings:
Architecture: 271 companies with asset experience in data centers
Engineering: 590 firms
General contractors: 620 companies
Property management: 170 companies
Construction: 1,982 companies
Consulting including environmental consulting: 509 companies
Cleaning and maintenance: 123 companies
CRE broker: 267 firms
REIF and REIT: 191 companies
If you think Biscred’s database would be of value to grow your business and generate more leads, talk to one of our specialists about seeing a demo of how it works.
Sources
1. McKinsey & Company, Investing in the rising data center economy, 2023-01-17, accessed 2024-10-29
2. The Goldman Sachs Group, Generational growth: AI, data centers and the coming US power demand surge, 2024-April, accessed 2024-10-29
3. DataCentre Magazine, Top 10: Countries with the Most Data Centres, 2024-02-21, accessed 2024-10-31
4. JLL, U.S. Data Center Report — Midyear 2024, 2024-08-27, accessed 2024-10-29
5. Commercial Observer, Demand for Data Centers to Grow in 2023 as Supply Chain Hampers Construction: Report, 2023-04-13, accessed 2024-10-29
6. Data Center Dynamics, JLL: Data center demand grows amid AI boom, but issues weigh heavy on sector, 2023-04-14, accessed 2024-10-29
7. Data Center Map, Data Centers, accessed 2024-10-29
8. Techjury, 15 Crucial Data Center Statistics to Know in 2024, 2024-01-02, accessed 2024-10-29
9. C&C Technology Group, Understanding Data Center Energy Consumption, 2023-06-08, accessed 2024-10-29
10. Medium, What is Normal Energy Usage for buildings | ClevAir, 2021-02-01, accessed 2024-10-29
11. Uptime Institute, Tier Classification System, accessed 2024-10-29
Image ID 163895479 | Andreistanescu | Dreamstime.com
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