North America: Data Centre Construction Surges due to AI

The amount of data centre supply currently under construction in North America has jumped by 69% compared to a year ago.

Reaching a record 3.9 gigawatts (GW), research released by CBRE Group finds under-construction activity in primary markets has dramatically increased. However, a shortage of available power and longer lead times for electrical infrastructure has continued to delay construction projects from being completed. 

As companies seek to capitalise on AI and cloud computing technologies, power demand from data centres has grown dramatically. 

This news comes in the midst of other CBRE research suggesting the vacancy rate has dropped across Europe’s leading data centre markets. For the first time in Q2 2024, it was reported that the colocation data centre vacancy rate fell below 10% in Frankfurt, London, Amsterdam, Paris and Dublin (FLAPD).

Data centre projects remain AI-hungry

The rise of technologies like AI and machine learning is driving significant upheaval across the data centre industry. To keep customers happy, businesses are now grappling with increased use of graphics processing units (GPUs) and liquid cooling to not only drive increased innovation opportunities but to also reduce heat from power-intensive applications. 

The North American market, one of the largest in the world, has experienced unprecedented growth in recent months, leading to significant transformation on account of increased cloud adoption, AI advancements and ongoing digital transformation across multiple industries. 

CBRE suggests that, whilst the industry has been willing to adapt to this growth, data centres are still having to wrestle with supply chain disruptions and rising construction costs. According to the report, new data centre inventory has grown by 10% in the first half of 2024, jumping 23% from a year earlier.

“Adoption and utilisation of digital applications will continue to drive data centre demand due to more storage, computing and processing of data,” the report notes.

In the first half of 2024 alone, more than 500 megawatts of new data centres were rolled out across the eight largest markets across the United States and Canada. CBRE has said the top North American data centre markets in 2024 so far have been Northern Virginia, Chicago, Dallas-Fort Worth and Silicon Valley, which have all experienced major year-over-year net absorption increases.

According to CBRE, supply in primary markets has increased by 24%, or 1,100.5 megawatts (MW) year-over-year. Likewise, under-construction activity across primary markets hit a record-high of 3,871.8MW - which is up by 69% from a year earlier. While cloud providers continue to lease most available power capacity, AI providers also account for a considerable amount of demand.

In particular, Atlanta under-construction activity has increased by 76% year-over-year to 1,289.1MW. 

An urgent need for sustainability

At the same time, data centre vacancy is dropping. CBRE suggests overall vacancy rates for primary markets fell to a record-low 2.8% in H1 2024 from 3.3% a year earlier, while the overall vacancy rate for secondary markets fell to 9.7% from 12.7% over the past year.

As the sector is evolving to meet new demands, they are also seeking to make these innovations sustainable. Particularly as traditional markets reach capacity, emerging secondary markets are becoming much more important and ultimately reshaping the landscape of data centre infrastructure.

CBRE notes in its report: “Demand for high-powered computing has exacerbated the pricing disparity between legacy facilities and new data centres, partially because older data centres don’t have the infrastructure to handle the power demands of today’s users.”

With carbon emission goals for 2030 rapidly approaching, the report considers if improvements in cooling efficiency, recycling waste heat and renewable energy power generation sources will become imperative for operators in H2 2024.

In order for data centres to grow successfully, sustainability is becoming very essential. CBRE’s report highlights just how critical data centres are in not only supporting the digital economy, but that they contribute to growth that can continue to influence future innovations for years to come.

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