2024 was a crazy and dynamic year for the data center industry. It went through a lot of changes and netted a record increase in demand, capacity, costs and pretty much everything else you can think of. And despite all of that… it was just the beginning of a new chapter for the industry.
As is customary during this time of the year, let’s see how the trends and expectations lined up and see if they surpassed their goals or not. And there’s certainly a lot of information to go through, so we tried to summarize it to the most important key points.
The booming data center world
One of the most discussed topics in the segment during 2024 was the constant demand for new data center capacities and the race for building new facilities. According to a forecast by ABI Research, by the end of 2024 there will be a total of 5,709 public data centers operational in the entire world. 5,186 of them will be colocation sites, and the remaining 523 are hyperscale sites.
As to be expected, most of them are in the Asia-Pacific region – 1,811. Europe is in second place with 1,558 and third – North America (1,357). If we look at individual countries, China is unsurprisingly in the lead, followed by the United States, Germany, the United Kingdom, Japan, Australia, Canada, and France.
ABI Research forecasts that by 2030, there will be 8,378 data centers operational worldwide. 7,640 of them will be colocation sites. This will result in a compound annual growth rate of 6.6%. The Asia-Pacific region will keep its lead with 2,126 sites, but it will be a much narrower lead as Europe is expected to have 2,108 data centers at that time. The North America region will fall further behind with 1,803 sites.
Despite the increasing focus on hyperscale data centers, the regular colocation sites, will continue to lead the segment not only during 2024, but in the years to come. In 2024, hyperscale facilities account for about 28% of the total data centers around the world, but by 2030, their share will be expected to grow to 43% as more companies will build such facilities to accommodate the AI workloads and increasingly data-hungry applications. As such the power capacity will also rise. Large data centers will need 142,682 MW while mega-sized facilities will demand 289,259 MW.
Currently, AWS has the most hyperscale data centers around the world – 126. It will build several more in the next few years and in 2030, they should be a total of 185. As such, AWS alone will have 25% of all hyperscale data centers. Microsoft Azure and Google Cloud Platform will be a close second and third respectively. These companies will focus their new projects mostly in Asia-Pacific as their infrastructure in the region are lacking, compared to the size and demand there.
The Middle East and Africa are also emerging as a datacenter hotbed. Now several countries in the region are working towards building more facilities. Saudi Arabia even plans to become a major manufacturing hub for data centers and will build a lot of the needed infrastructure there.
What did we expect for data centers in 2024
In the beginning of this year, we laid out some of the expected main trends for data centers in 2024. Artificial intelligence (AI) was the key trend and of course and it lived up to expectations – actually, it also surpassed them by quite a bit! The demand for AI resources forced data center operators to try and accelerate construction projects as much as possible. But it also led to some new challenges, including worries that the energy grids in many regions may not be able to withstand the demand.
Hyperscale and shared spaces were a second big trend expected for 2024, and as the ABI Research survey showed, it delivered. Another key aspect of this trend is that data center operators continued to optimize their facilities and increased rack densities, improved cooling and energy consumption. They also became more open to solutions that were considered exotic not too long ago, for example, by raising the average server room temperature by a couple of degrees. This leads to sizeable savings for cooling and energy costs.
Another key trend for 2024 was the optimization of the cloud. This one seemingly didn’t pan out in the expected scale. The cloud somewhat took a back seat in the main focus areas of data center operators. While there weren’t many major innovations or changes in the cloud segment, it still remained an important area for the industry. Costs continued to rise because of the overall pressure data centers were feeling with the increased demand by AI workloads, colocation, and other services
The next trend for 2024 was the skill shortage. Sadly, this continued to be the case. In fact, it creates additional bottlenecks in some regions where new constructions are booming, but since they weren’t data center hotbeds before, there is now a severe shortage of skilled workers to staff the new facilities. As such, operators were again forced to think outside the box. Fast-tracking employee training is not enough, and it creates risks to end up with workers who are prone to mistake. So, another solution for operators is to relocate, even if temporarily, skilled workers from older data centers to the new ones. They can help with the initial configurations, setups, optimizations and to be a failsafe while the new employees gather some much-needed experience. Remote assistance is also becoming more and more popular.
The next major trend was increased focus on edge computing. That one also happened, and the edge enjoyed more attention than ever. In fact, it emerged as a much-needed solution in the AI era. Edge locations provide relief for data centers, by taking the main part of AI calculations close to the source, thus sending data to the main facilities only for more specific workloads and storage. As such, edge computing solidified its position not as a data center competitor, but a partner working together with the data center to provide and even better service and experience.
The next trend was, of course, energy innovations. Data centers are becoming one of the biggest electricity consumers in the world. Their energy demand increases a lot faster than even the “bravest” forecasts were expecting. So fast in fact, that some experts warned data centers will soon end up being without enough power to satisfy their needs. What’s more, some regions imposed limits on utilities companies for data center energy out of fear there won’t be enough electricity for the regular consumers and businesses.
As a result, data center operators started to again do things they weren’t expecting to do. For example, there’s an increased focus on nuclear energy. Small reactors are now being researched with the aim of adding them locally to data centers in the near future. And some hyperscalers are entering partnerships to restart older nuclear power plants for the sole reason to provide electricity for their facilities.
What else happened in 2024?
Of course, not everything happens only according to the initial forecasts. Some trends were shaping up during the year without being an initial highlight.
For example, the record low vacancy rates. They are around 10% almost everywhere. Singapore is the world’s most constrained data center market and has only 7.2MW of available capacity as of the end of the first half of 2024, shows an analysis by CBRE. That’s an almost 1% vacancy rate. Meanwhile, the main markets in Europe have a combined vacancy rate of 10.6% – falling 2%. In Latin America we have an 11.1% vacancy rate, also falling.
Asia-Pacific trended in the opposite direction to the market. Its vacancy rates increased from 13.5% to 16% due to the fast addition of new facilities. There’s big fragmentation though, as Singapore has 1% vacancy, while Hong Kong leads with 30%.
Finally, North America. It’s the region with the lowest overall vacancy rate of just 2.4% which decreased from 6.7%. All regions’ net record new capacity being added, but it’s not enough to cover for the increase in demand. At this rate, vacancies are expected to remain at record lows for a while. While it seems like good news, most of the data center community views it in a slightly negative light. The reason is low vacancies are leading to an increase in prices, thus pricing out some clients. Most of the industry prefers to have enough capacities for clients of all budgets as this keeps the diversity. If the segment focuses mainly on the bigger clients with more resources, many data centers will be restructured to accommodate their needs. Thus, the sector risks ending up with tailored data centers for specific workloads while leaving the rest to pay more for common services.
And this is another trend that formed in 2024 – workload-specific data centers. We can thank AI for that. Due to the massive increase in the demand for AI workloads, many data center operators started to focus on this service. And since AI workloads are demanding different hardware and software than most other data center uses, this is creating a new segment – AI data centers. Many of them are actually reformed crypto data centers, but also some are just rebuilt, restructured, and refocused facilities. Thus, the availability for other services, like cloud and especially colocation, is becoming even more scarce.
“While power availability may remain at the forefront of delivery concerns, adaptive reuse developments are becoming a favorable alternative to extended power delivery timelines. Former industrial sites with existing power infrastructure provide an option for providers and users to potentially bring bridging data center capacity to the market sooner,” says DataCenterHawk in a recap of the market for Q3 2024.
“The data center market continues to grow in Europe, but the traditional strongholds FLAPD are slowing. New markets are continuing to open with developments throughout southern European countries and the Nordic region. AI and HPC workloads are driving the demand with large power capacities required to support these installations. This pattern is set to continue throughout the region. Pricing is also due to increase due to rising construction materials and costs, new technologies such as liquid cooling, and GPU power infrastructure. The shortage of available data center capacity will also lead to increased demand for those companies who can deliver large scale developments in the timescale that is acceptable to the clients. This will also lead to higher prices for the industry,” and it can serve as a good recap of the challenging 2024 for the data center market.