Data centre demand remains relatively steady, research shows

Data centre demand remains relatively steady, research shows

Study indicates there is growing demand in data center industry amid supply chain crisis

By Anthony Mutunga

Data centre demand remained relatively steady when compared to other industries thanks to the fact that over the years, and especially due to the pandemic, most players are accelerating towards a totally digitally connected world.

According to Turner & Townsend’s latest data centre cost index, the increasing costs in every market due to a year of supply disruption, did not depress data centre demand in most markets. 

The index surveyed global markets consisting of 44 locations with over 90% of the respondents being confident that demand in 2022 will be even greater than 2021, as opportunities continue to rise across primary, secondary, and now tertiary markets.

As compared to previous index (2020), Tokyo has overtaken Zurich as the most expensive data center market as its cost per watt stood at 12.5/w while that of Zurich was 12.0/w. Coming in at third were California’s Silicon Valley and New Jersey which continue to share the position at $10.3/w, as compared to 2020 when it stood at $9.8/w. 

The research also shows that while more and more competition is being recorded in the USA, investment has moved to Europe, where higher yields are a possibility. 

With Europe being attractive to investors, new markets such as Oslo, Stockholm and Istanbul have been rising, with some reaching an extent of overtaking popular traditional markets such as London and Frankfurt. As an example, according to the index, London which was in position five in 2020 has slipped to position 12 ($9.1/w), being overtaken by both Oslo ($9.5/w) and Stockholm ($9.3/w) which are in the 6th and 7th position respectively. In fifth is Seoul with $9.7/w.

As per the index, apart from the increasing interest in the developed world, fresh sources of demand and significant market opportunities were identified in developing regions, where people are at the steepest part of the digital adoption curve. Such regions include Africa and South America, where the digital market is coming of age and the use of internet enabled devices is growing. 

Even though not rising as those at the top, theses regions were able to record relatively steady costs. For instance, the cost per watt remained relatively steady in Johannesburg increasing from $6.6/w in 2020 to just $6.7/w in 2021, while in Nairobi it rose from $6.9/w in 2020 to $7/w in 2021; and costs in Sao Paulo have remained on a par at $6.9/w in both years.

Despite the growing demand and market confidence, there are challenges that stand in the way, and climate crisis is one of them – with data centres being resource-hungry facilities, their demand only fuels the climate crisis. Therefore, according to the index, there is need for careful planning, investment in green technologies and upskilling of the supply chain, which must all happen at pace and scale to deliver the necessary infrastructure for a new net zero digital world. 

Additionally, the carbon footprint of the industry is also another challenge that if left unhandled will cause a reduction in data centre growth. Therefore, there is a need to reduce carbon cost during construction either by converting former industrial space to data centres or increasing investment in battery capacity.

Dan Ayley, who is a global head of high-tech and manufacturing at Turner & Townsend says the challenge for the global industry is how to deliver investment against a backdrop of rising material and labour costs as well as a critical decarbonisation agenda. 

Tackling these challenges is important to stop them from acting as a brake on investment, with both capital expenditure and operating costs under pressure. Data centre owners should manage risks to investment, gaining as much certainty as possible of what is being built and when, and getting close to the supply chain to understand capacity and proactively assess possible issues. 

Even though there is big demand for data centres, it is important to come up with solutions to do away with the global supply chain crisis. Only in doing so will demand be met at an affordable and timely manner.

“The sector needs to adopt a programmatic approach which looks holistically at supply chain capability – identifying areas of innovation in build processes and ongoing operations that improve cost and carbon performance,” says Mr Ayley.

Leave a Reply

Your email address will not be published. Required fields are marked *

Sign Up