Data Center Leasing Activity Outlook

By: Kelly McBride, Jeff Groh, and Allen Tucker

Increasing demand for cloud-based services is fueling data center leasing activity.

AS ADOPTION of cloud technologies to support the Internet economy and digital content-driven consumption accelerates, demand for third-party data centers that support the cloud-managed service sector is projected to double in the next five years. Globally, the multitenant data centers (MTDC) market is expected to rise at a compound annual growth rate (CAGR) of 12.1 percent between 2015 and 2018. Market absorption for MTDCs, measured in megawatts (MW), is increasing exponentially in many U.S. metro areas, which currently represent 44 percent of the global market.

Today’s data center IT decision makers are using increasingly sophisticated criteria when they shop for space and power. The “big six” data center REITs — Equinix, Digital Realty, DuPont Fabros Technology, CoreSite Realty, CyrusOne and QTS — have continued their development binge, while smaller MTDC players also made some notable acquisitions in 2016.  As the data center market grows, cloud providers want to bring data applications and storage closer to consumers while decreasing latency and increasing reliability, opening new markets for potential data center construction. More flexible buildouts are allowing diverse players to enter a market once dominated by only the largest providers.

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