Market Trends of Brazil Data Center Construction Industry
IT and Telecom to Register a Significant Market Share
- Since 2021, the demand for IT services, crucial for business continuity and bolstering organizational resilience, has been on a steady rise. In 2021, Scala Data Center initiated the construction of its SP4 facility, with an initial launch target set for April 2022. Notably, the SP4 facility, boasting an 18-MW capacity, was entirely allocated to a single-tenant cloud provider, underscoring the escalating demand for cloud services within the nation.
- According to SAP Brasil's press release on January 2024, as economic growth resumed and organizations increasingly turned to cloud solutions, coupled with the integration of artificial intelligence in business management, the company saw a notable upturn in 2023. The subsidiary notched up robust double-digit growth in both total revenue and cloud revenue, surpassing its 2022 figures. This growth was primarily fueled by the rising appetite for cloud-based ERP systems. These systems are known for their standardized, updatable platforms, amalgamated management, data analytics, application development, automation, and AI functionalities.
- The key players in the region are focusing on expanding cloud services in order to serve the growing requirement for cloud solutions in the region. For instance, in November 2023, Huawei announced the construction of a third availability zone for its Brazilian cloud region, set to be operational in the first quarter of 2024. Additionally, the company is in the planning stages for a third availability zone in Mexico.
- The telecom segment is expanding at a rapid pace in the region. For instance, according to a recent report by the telecom association GSMA, 5G subscribers in Brazil are expected to surge to 179 million by 2030, a significant increase from 36.2 million in 2025. The report highlights a projected 5G penetration rate of 16% by 2025, set to soar to 77% by 2030.
- The association also highlighted that Brazilian operators are actively considering 5G fixed wireless access (FWA) solutions. Projections suggest a robust growth rate of approximately 190% annually for 5G FWA connections in Brazil over the next four years. The GSMA anticipates that by 2025, Brazil will boast over 1 million 5G FWA connections.
- This surge in data storage demand is poised to elevate the need for data centers in the region, thereby bolstering the prospects of data center construction firms in the coming years.
Understand The Key Trends Shaping This Market
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Tier 3 is Expected to Hold a Major Share of the Market Studied
- In 2023, there were 68 data centers in Brazil with tier 3 certification, with a cumulative IT load capacity of 440 MW. Reliability and affordability are the major factors driving the demand for tier 3 data centers in the country. The segment is projected to register a CAGR of 8.2% to reach 869 MW by 2030.
- In 2023, Sao Paulo hosted the maximum number of tier 3 data centers in the country, with a market share of 72.2%, followed by Rio de Janeiro at 10.8% and other hotspots (Ceara, Cascavel, Curitiba, Ribeirao Preto, and other regions) at 17%.
- When it comes to IT load, the majority of tier 3 data centers in the region prioritize catering to large and massive loads, with large centers leading at 54.5%, followed by massive at 26.6%. Medium and small loads, while less common, still account for significant portions at 17.6% and 1.6%, respectively.
- In 2023, Ascenty Data Centers (now under Digital Realty) led the market with 20 data centers, boasting a dominant 35.9% share and holding a tier 3 certification. Equinix Inc. followed closely, operating seven facilities and capturing an 11.2% market share. Cirion Technologies, now part of Lumen Technologies, maintained a 9.6% share across its three facilities. Scala Data Centers, with six facilities, secured a 7.8% share. The remaining market share was distributed among various other players.
- Over 16 data center facilities are under construction in the country, all adhering to tier 3 standards. Key players leading the tier 3 data center construction include Scala Data Centers (56 MW), Ascenty Data Centers (Digital Realty) (64 MW), and Nabiax (10.7 MW). The majority of these facilities are slated for completion in Sao Paulo, with a smaller number in Rio de Janeiro and other regions.
- Such instances in the market studied are expected to drive demand for tier 3-certified facilities. This surge in demand, specifically from the tier 3 segment, will, in turn, bolster the need for data center construction services in the years ahead.
