Smart TVs, smartphones, personal virtual assistants, video game consoles, tablets, wireless earbuds, refrigerators – and the list goes on for connected devices in US households. This list has grown so much that 2023 data showed US households on average having 17 connected devices. The reliance on online connectivity requires reliable data storage and processing, marking data center real estate as one of the most valuable assets for investors and tech companies alike. With a growing demand, what dictates the most ideal location for these facilities?
Why Are Data Centers Growing in Importance?
Data centers are facilities that house telecommunications storage systems and associated components. These facilities provide the electrical power, physical space, technology, and bandwidth that telecommunication carriers and network service providers need to get their services out to customers. Given the power data centers can hold and transmit, these centers act as the backbone for countless digital services such as cloud storage, streaming platforms, and AI applications.
As the rate of internet users has continuously increased over the last few years, the demand for data center real estate is rising, as companies compete to secure prime locations.
Location, Location, Location!
So, what makes a location prime for data center real estate? After all, 97.1% of Americans rely on internet connectivity for both personal and business use, so where a data center is built must offer reliable infrastructure needed to keep users online.
When looking at data center real estate options, some key considerations taken into account are:
Proximity to Urban Centers
Being able to deliver real-time services and reducing latency to large populations are key functions for data centers, so being in proximity to major cities is crucial. Typically, larger cities already have fiber and electric infrastructure that can withstand the need to keep data centers up and efficiently running. An example of a location that checks these boxes is Chicago, which offers access to large quantities of power with lower costs for available developable land.
Power and Connectivity
Data centers require a steady and robust power supply to ensure continuous operations and healthy maintenance of data center components. Additionally, with many companies and organizations seeking to become more sustainable in their operations, access to renewable energy is increasingly more important than ever before. This is where many companies are getting creative.
For instance, Polar, a European data center operator, has strategically chosen Norway for its data centers due to its stable energy supply and cooler climates. Climates like that in Norway help components stay cool and free of excess humidity, which is requisite for the longevity and proper operation of data center equipment. This in turn also enables organizations to save money that would otherwise be used to bring temperatures and humidity levels down consistently.
Sometimes data center real estate may not be in the coolest climates, but companies have been able to find other ways to compensate. Dallas, Texas brings a perfect example to this point. Although summer temperatures and humidity can reach peak levels, Texas having a deregulated electric market means businesses have options for competitive electricity costs. Texas also has abundant access to energy sources with Texas being a top producer of both fuel and renewable energy in the US. These conditions make locations such as Dallas a hot spot for data center hubs.
Security and Disaster Risk Management
Data centers power our digital lives, thus requiring stringent security measures to make sure systems continually stay online. Natural disasters like hurricanes, earthquakes, and floods, must be factored in when deciding where to house data centers. Companies invest heavily in strategies that protect their facilities from these risks, such as by selecting areas with lower natural disaster potential and implementing state-of-the-art infrastructure, sturdy structural engineering, and maintaining robust disaster recovery plans. Data center real estate in politically stable regions also provides a secure environment for data centers and minimizes the risk of external breaches or attacks.
An underground bunker in St. Louis, Missouri fits this bill. Once a government emergency response facility, the bunker is already constructed of reinforced concrete which can withstand nuclear and EMP attacks. This area also has a low natural disaster risk score compared to many other areas across the US. Although an underground bunker may sound a little odd, it makes for prime data center real estate.
Investment Trends
As demand for data centers increases, so do real estate costs in prime locations. The competition for space near urban centers and key infrastructure is intense, making it difficult for some companies to secure ideal locations without paying a premium. However, with more vacant office spaces available since the COVID-19 pandemic and an uptick in remote work, some investors are repurposing these spaces into data centers. The move to these spaces optimizes underutilized properties while meeting the growing demand for data infrastructure.
Additionally, hyperscalers like Amazon, Google, and Microsoft require massive facilities that can support vast, distributed networks to provide unmatched scalability and flexibility, much more powerful than traditional data centers. These providers are reshaping the data center real estate market by investing upwards of billions of dollars to equip data centers to meet storage and computing needs, as well as entertaining data center locations overseas in regions that offer the benefits previously discussed.
The Future of Data Center Real Estate
The demand for data center real estate shows no sign of slowing down, especially as AI, 5G, IoT, and other innovative technologies continue to evolve. Further development and usage of these technologies require computing power, thus driving demand for data storage and processing facilities. While data center real estate may require additional considerations, it remains one of the most promising areas of investment and creative development in today’s digital economy.
Data centers play a pivotal role in the transmission and storage of data. Telecommunications and internet service providers can utilize data center details during network planning and scaling cloud and data storage solutions. For urban planning and economic developers, network availability and service within an area pose great opportunities, as well as gaining insight into the availability of service providers in target locations for property appraisal and property value research poses opportunities for real estate companies.
As a trusted resource of fiber maps and telecom datasets, GeoTel’s Data Center Dataset can offer powerful leverage and insight to make intelligent, location-based decisions. Contact our specialists today to explore how GeoTel’s unique database can benefit your organization.
