Market Trends of Israel Data Center Construction Industry
The IT and Telecom Segment is Expected to Have Significant Market Share in the Coming years
- The IT and telecom segment in the Israeli data center market reached an IT load capacity of 20 MW in 2023. It is expected to register an annual growth of 13.8% to reach a capacity of 48.3 MW by 2029. In April 2024, as per official documents, the Israeli Ministry of Defense established a dedicated "landing zone" within Google Cloud. This zone is a secure gateway to Google's computing infrastructure, enabling the ministry to store and process data and utilize AI services.
- According to a draft contract dated March 2024, the Israeli Ministry of Defense engaged Google's consulting services to improve its Google Cloud access. The aim was to enable various units within the ministry to leverage automation technologies. The contract details a billing of over USD 1 million from Google to the Israeli Ministry of Defense for these services.
- In August 2023, Amazon.com unveiled a strategic move, committing approximately USD 7.2 billion in investments in Israel, slated to span until 2037. Simultaneously, it inaugurated its Amazon Web Services (AWS) data centers within the nation. These data centers will empower the Israeli government, granting them the capability to both run applications and securely store data within Israel's borders. Yali Rothenberg, Israel's accountant general, expressed optimism, noting that the establishment of this regional infrastructure will facilitate a significant migration of governmental workloads to the cloud. This, he believes, will play a crucial role in speeding up the country's digital transformation in the public sector.
- Israel intensifies its telecom growth efforts by rolling out a 5G network. A notable milestone was reached in April 2024, as Pelephone, in collaboration with Ericsson, unveiled Israel's inaugural independent 5G network core. This venture, dubbed the MAX G5 network, was backed by an investment of around NIS 50 million.
- Such market instances create more data needs in the coming years. 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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The Tier 3 Segment is Expected to Hold the Major Share in the Country
- In 2023, there were around 16 data centers in Israel with Tier 3 certification, with a cumulative IT load capacity of 167.4 MW. Reliability and affordability are the major factors driving the demand for tier 3 data centers in the country. The Tier 3 segment is projected to register an annual growth rate of 9.1%, reaching around 327 MW by 2030.
- In 2023, Tel Aviv dominated the Tier 3 certified data center landscape, with Adgar leading the pack, boasting an IT load capacity of 107.9 MW across two facilities. Bezeq International Ltd is closely followed by 32.5 MW distributed over six facilities. Serverfarm LLC operated a single facility with a 10 MW IT load. EdgeConneX Inc. managed 7.7 MW under one facility, while other players in the market held smaller shares.
- During the study period, Tel Aviv is set to see the construction of about five data center facilities, all meticulously designed to adhere to Tier 3 standards. These strategic facilities are poised to add over 60 MW of IT load capacity to the region.
- Throughout the study period, key players plan to invest in data centers, including Digital Realty, Lian Group, and MedOne. These developments in the Israeli market are expected to amplify the demand for Tier 3 certified data centers. This heightened demand, particularly within the Tier 3 category, is expected to fuel the necessity for data center construction services in the coming years.
