Market Trends of Los Angeles Data Center Industry
Growing Cloud Applications, AI, and Big Data
- 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.
- For instance, in December 2022, a new Oracle Cloud Infrastructure (OCI) region officially began operations in Chicago, according to Oracle. The new area, which is Oracle's fourth in the United States and 41st overall, is a public cloud region. The business also runs two general US Government regions, three Department of Defense-specific US Government regions, several US National Security regions, a TikTok plant in Texas, and regions in Ashburn, Virginia, Phoenix, Arizona, and San Jose, California.
- 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.
Understand The Key Trends Shaping This Market
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High Adoption Of Hyperscale Data Center
- The rising adoption of hyperscale data centers is a significant driver of the data center construction market. Hyperscale data centers are large-scale facilities that are designed to support the massive amounts of data processing and storage required by modern businesses and organizations.
- These data centers are typically owned and operated by cloud service providers such as Amazon Web Services, Microsoft Azure, and Google Cloud, as well as large enterprise companies like Facebook and Apple. Hyperscale data centers are characterized by their massive scale, with some facilities spanning over a million square feet and containing tens of thousands of servers.
- 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.
- As a result of these benefits, the adoption of hyperscale data centers is expected to continue to grow in the coming years, driving the demand for data center construction. This presents a significant opportunity for businesses and investors looking to enter the data center market, particularly in regions with a high demand for cloud-based services and applications.
