Shifting clouds, surging M&A shape 2017 data centre demand
As consumers turn to their smartphones for everything from streaming video to buying their groceries, the data centre industry is stepping up to meet escalating demand for storage. A new report from JLL reveals data centre construction in North America is up 43 per cent from 2016 and industry consolidation powered a $10-billion surge in mergers and acquisitions (M&A) in the first half of 2017. Meanwhile, cloud leasing activity started shifting to global markets.
“While M&A activity is surging, data centre leasing has quietly returned to normal in the U.S.,”said Bo Bond, Managing Director and Data Centre Solutions Co-Lead, JLL. “The acquisition of large amounts of server space in the U.S. by cloud companies continues, but is no longer as frenetic as it was in 2016. Data centre users are now turning their attention toward filling out their global data centre footprint and making technology investments to keep them ahead in a rapidly changing industry.”
Data centre users investing in the future
In the report, top data centre users revealed the biggest industry changes coming over the next two years and addressed the hot topics in the industry and how they affect their investment decisions. According to users, efficiency programs will install automation to make data centre operations more valuable to the core business; artificial intelligence will help reduce human intervention in data centres and significantly cut time to restore operations in the event of a failure; artificial intelligence will make greater use of predictive analytics on-site; and processor technology investments will improve cooling and reduce energy usage. “
Data centre users are investing in systems that will allow them to use their servers more efficiently and effectively,” said Mark Bauer, Managing Director and Data Centre SolutionsMarket Director, JLL. “Essential technological advancements like artificial intelligence to anticipate failures and automation to reduce response time are what the industry needs to keep up with today’s digital consumer.”
Following the raging storm of U.S. cloud activity in 2016, big-name cloud providers swooped in to Montréal in the first half of 2017. The timing is right for providers to enter the Canadian market and take advantage of its optimal pricing and low power rates.
Supply is being driven by a few key companies: ROOT Data Centres in BaieD’Urfé; COLO-D in Longueuiland Drummondville; Urbaconin in downtown Montréal; and CogecoPEER1 in Kirkland. Smaller providers such as METRO OPTIC also have capacity available in the downtown core. Demand in the Montréal market remains extremely robust due to low power costs and cloud service providers demand. The demand shows no signs of slowing down and absorption rates remain extremely brisk.
In this region, cloud companies continuing to expand rapidly. Government Shared Services RFP is indicative of large organizations moving to the cloud. Renewable energy coupled with competitive power pricing from Hydro Québec make the Greater Montréal an attractive market, and large investment funds are putting money to work through data centre development and acquisitions.
Wholesale colocation inventory is expanding in Toronto, driving market competition. As in Montréal, supply is being driven by a few key companies—primarily DuPont Fabros (DFT) and Urbacon. DFT’s TOR1 facility (the former Toronto Star printing press) will add new wholesale colocation space in Q4 2017. Urbacon has recently announced the addition of 10 MW in Richmond Hill. I.C.E. DATA CENTRES is also bringing new inventory to the market. Further, Ascent purchased the BlackBerry facility in Cambridge, adding another 4.8 MW to supply.
Demand in the Toronto market remains buoyant with traditional financial services and high technology businesses absorbing both space and power. Toronto’s place as the centre of business in Canada continues to provide a safe haven for mission critical infrastructure; however, the demand and supply economics certainly favour end-users. Market trends find cloud companies looking to solve local market latency and connectivity needs. Financial services remain at the centre of the Greater Toronto Area (GTA) market.
Supply is high in Calgary, yet low in Vancouver. Calgary is facing a struggling local economy as well as minimal incentives being offered to users –no new projects are expected as operators work to fill vacancies within existing portfolios. Conversely, supply is low in Vancouver with every operator at or near capacity. Yet, in a market performing extremely well, only one expansion is anticipated due to the high costs of building.
Demand for both Calgary and Vancouver is slower than 2016 for multiple reasons but expected to pick up as the big six cloud operators and international colocation operators investigate Western Canada. Also, Calgary is seeing typical transaction sizes significantly lower than in 2016, with the requirements in the market consisting of 60 kW or below. Market trend predictions are saying to expect interest to stay consistent until significant rent reductions and other concessions emerge. Initial POPs into Western Canada with primarily U.S. based hyperscale operators will continue to trickle in to satisfy Canadian customers.