Market Trends of Houston Data Center Industry
High Adoption Of Hyperscale Data Center
- Despite slowing leasing activity, the market remains appealing for data center operators, with 78.4 percent of new construction preleased and a positive outlook for the healthcare and energy industries. Power tariffs in the region are also among the lowest in North America. The Houston market is poised to expand in the following years as data center providers shift from high-vacancy, high-cost main markets to cheaper secondary and tertiary regions with more land and power availability.
- As the demand for digital IT infrastructure grows, hyperscalers and edge data centers are expected to be the fastest-growing segments of the data center market. Indeed, the hyperscale market is predicted to increase by 20% between 2021 and 2026 as more major IT businesses seek to address the rising demand for data processing and storage.
- With 314 new hyperscale sites under construction globally now, the number is likely to exceed 1,000 by the end of 2024, up from roughly 500 locations just five years ago. According to Uptime Institute, the United States has 53% of hyperscale capacity.
- With hyperscale demand at an all-time high, we anticipate an increase in partial-interest exchanges and forward sales of new builds. Furthermore, rising interest rates will likely boost sale-leaseback transactions for businesses looking to raise capital.
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Increased Migration to Cloud & IT based Business Operations
- The growing adoption of cloud applications, artificial intelligence (AI), and big data is driving the demand for the data center market. As more businesses and organizations shift their operations to the cloud, they require larger and more advanced data centers to support their needs.
- Cloud applications have become popular in recent years because they enable businesses to access software and services via the Internet rather than installing and maintaining them on their hardware. This has increased demand for cloud-based data storage and processing capabilities, which big data centers usually provide.
- The data center model has changed thanks to cloud computing. Traditional data centers, which run on hardware and require a lot of room, are no longer practical. As a result of the commercialization of storage, computing, and network resources by cloud providers, hyperscale cloud-based data centers have emerged. These public cloud service providers directly own and manage these data centers.
- Additionally, the growing data privacy and security requirement is fuelling demand for data centers. Because of the increase in cyber risks and data breaches, businesses and organizations are looking for secure and dependable data storage and processing solutions, which advanced data centers can only offer. The need for data centers will likely increase as businesses and organizations increasingly rely on these technologies to support their operations. This is a significant potential for companies and investors interested in entering the data center market.
