Market Scenario
Global data center market was valued at US$ 328.10 billion in 2023 and is projected to hit the market valuation of US$ 792.29 billion by 2032 at a CAGR of 10.64% during the forecast period 2024–2032.
The global data center market is on the rise, which is attributed to cloud computing, AI and other data-intensive technologies. In the US alone, data center power consumption is expected to double from 17 GW in 2022 to 35 GW by 2030. This staggering growth attracts all kinds of investors, from those that are experts in growth capital and buyouts to real estate and infrastructure. Beyond traditional investments into data centers, there are opportunities with related sectors such as prefabrication and modular (PFM). Just last year Hyperscale companies invested $9bn in PFM capacity building, which was a huge leap from the previous capex of $1bn between 2017-2020. The PFM market is forecasted to grow at an annual pace of over 4% until 2030.
Today, Singapore has become one of the most desired markets in Asia due to its strict sustainability standards for power supply. The country’s data center market faces less than 2% vacancy due to this reason. As a result, the country has started expanding its reach with partnerships like Google's investment into an undersea cable that connects Singapore with Indonesia and North America via trans-Pacific lines. On the other hand, European Union’s data centers consumed 76.8 TWh of electricity in 2018 — or roughly equal to Portugal’s total power consumption that same year — making up almost 3% of EU energy demand. By comparison it comprised just under 2% in 2015.
Hardware efficiency gains helped curb energy demand within data centers for years now. However, if growth continues at this pace, then it may end up outstripping these gains entirely. With current levels of usage some commercial lease rates are being increased by operators so they can offset costs associated with the intensive workloads these facilities provide. In line with this, the market is being more focused on next-gen computing, storage, and heat removal technologies to battle this potential issue. For instance, data centers globally reduced their energy use from 97.6 TWh to 50 TWh, while hyperscale data centers doubled their energy use in the same period as they grew at a rapid pace from 2015-2019. Over the past few years, the data center market has grown significantly but it still only accounted for around 1% of global electricity consumption in 2022 and about the same percentage as it did in 2010. However, the cloud is expected to make up roughly 35% of all digital infrastructure by 2027.
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Market Dynamics
Driver: Rapid Increase in Data Center Demand
The demand for data centers is surging globally. In the US, a primary indicator of growth, power consumption by data centers is projected to double from 17 gigawatts (GW) in 2022 to 35 GW by 2030. Importantly, the US holds roughly 40% of the global data center market share. This expansion is reflected in the overall market size, with global data center market revenue expected to reach $792.29 billion by 2032, representing a CAGR of 10.29% from 2024-2032. As of March 2024, there were a reported 5,381 data centers in the United States, the most of any country worldwide. Germany had 521 data centers and the United Kingdom had 514. Data centers need lots of power, often at least 100 MW for each center, making power consumption one of the best ways to measure total market size
Edge computing, which brings computation and storage closer to data sources, is another major driver of growth. The global edge computing market is forecast to reach almost $128 billion by 2032, fueled by the continued rise of technologies like 5G and the Internet of Things (IoT). Apart from this, cloud IT infrastructure is a significant contributor to data center demand, with spending in this area predicted to reach $90 billion in 2022 and surpass $130 billion by 2026.
Data center REITs (Real Estate Investment Trusts) are proving to be popular investment vehicles. These REITs offer exposure to data center growth while providing recurring income from long-term tenant contracts. Digital Realty Trust (DLR), the largest data center REIT, demonstrates this trend with a stock price increase of over 188% in the past 10 years. Emerging markets, particularly India, represent significant growth potential. The Indian data center market is forecast to expand at a CAGR of 12% between 2022 and 2032. Today, the data center industry is increasingly turning to automation and artificial intelligence (AI) technologies to optimize operations, enhance efficiency, and drive further innovation.
Challenge: Highly Competitive Market with Established Players
The data center market is a highly charged place, with veteran players carrying large chunks of the industry. For example, in the United States, the top 10 providers controlled over half of the market back in 2022. With that level of dominance, it’s hard for new investors to get their foot in the door; however it’s not impossible. They must think outside of the box and find ways to stand out in this overcrowded business world. An option could be seeking underserved geographic markets, offering specialty services like high-speed computing or focusing on specific customers within a specific industry. Taking another route and solely relying on price can be dangerous as prices would eventually get so low, it would make them seem worthless compared to other options available in this competitive landscape. The goal is to provide value that will be significant enough to customers that they’ll pay more than they normally would from someone else.
Keeping stock low while demand is high makes it difficult for newcomers trying to establish themselves into prime data center markets like Singapore where vacancy rates are less than 2% (in 2022). The scarcity of power and strict requirements for sustainability keep pricing tight and new entrants out. Another barrier is needing an excessive amount capital up front for land, buildings and equipment which landlords may not have time for if they’re priced out by competitors who were already established before them. The rapid growth of hyperscale cloud computing has been changing the game for traditional data center operators all across the world; Cloud giants like Microsoft and Google are making traditional owners take second looks at what they need to do differently if they want to keep up with these new company’s demands and control power dynamics moving forward.
Significantly High-Power Consumption Puts More Stress on Capital Expenditure
When it comes to consuming electricity, there is nothing that beats data centers. Their IT equipment alone demands a lot, add the resources required to maintain optimal cooling and it's plain to see how this industry impacts global energy consumption. In 2022, data center market worldwide consumed between 240-340 terawatt-hours (TWh) of electricity – that’s around 1-1.3% of total global electricity use. In the European Union alone, data centers used up 104 TWh in the same year. This don't look any better when zoomed in on specific countries either: For instance, the US data centers used about 14 billion kWh of electricity in 2024 which made up roughly 1.8% of the country's total electricity consumption. This number is also forecasted to rise - doubling by next decade to reach about 35 billion kWh by 2030. It should be noted, however, that as energy usage from the industry will likely continue its upward trajectory alongside continued growth and demand for more data storage and processing, the rate at which it does so is expected to slow down compared with previous years.
Servers and cooling systems are usually top culprits when it comes to using up excessive amounts of energy within data centers because they constantly need power to work properly. Networking devices and storage drives also require large sums of energy. While modern advances have greatly boosted IT devices’ efficiency, experts worry that heavy-data applications like AI may offset those gains with their own demands. Consequently, many tech-laden companies are starting or continuing their investment into renewable power sources so they can do everything possible to build more sustainable facilities. Even if individual sites become completely eco-friendly, there still remains the challenge of matching such a massive demand with clean power production.
Segmental Analysis
By Component
On the basis of component, the solution segment is expected to hold more than 65% of the global data center market. However, the service segment is estimated to record a robust CAGR of 11.29% during the forecast period. The rapid adoption of IoT, cloud computing, and AI technology has led to increased data generation. In order to store this data cost-effectively and securely, IT and telecom companies are leaning towards third-party data centers. This trend will have a positive impact on the overall industry outlook. Increasing demand for cloud-based services among enterprises is pushing industry players to expand their facility capacity. E-commerce giants like Amazon, Microsoft, and Google are rapidly investing in building their own facilities or leasing spaces from existing operators. This shift in preference will continue driving market expansion in future as well.
Emerging markets are witnessing significant investment towards infrastructural development. For instance, Mumbai – one of India’s largest data center markets – is projected to double its capacity within next two years with new financial institutions entering into business landscape. Seoul (South Korea) is also attracting hyperscale developments owing to technological advancements and its proximity with major markets. Shanghai (China) has recently begun investing in 5G infrastructure along with artificial intelligence which will generate notable demand for data storage facilities across the region.
Some companies are offering vertically integrated solutions including development & design, managed services, power provisioning etc., to cater customer needs for full-stack solutions while capturing additional margin for themselves at same time. The growing demand for advanced technologies such as IoT and AI has attracted various investors including specialty REITs, infrastructure funds etc., across multiple geographies globally. However, supply chain constraints and power grid limitations could restrain short-term growth pattern for the market .
By Type
The hyperscale segment is the second most dominant in the data center market. It holds a 35.14% share of the market and is also projected to grow at the fastest CAGR of 11.23% from 2023 to 2032, outpacing the overall data center market’s expansion rate. Fundamentally built and operated by major cloud service providers – Amazon, Microsoft, Google, Facebook, Apple, Alibaba and Tencent – to support their massive global cloud platforms, these hyperscale data centers have become an infrastructure necessity for these companies. Over 50% of total data center leasing activity worldwide in 2022 was driven by hyperscalers’ rapid infrastructure expansion. The top five are on track to spend over $120bn on data centers this year alone (up significantly from $74 billion in 2019).
Today, hyperscalers use prefabricated modular data centers so that they can enter the market faster and reduce costs when operating on such a large scale. The global prefabricated modular data center market is expected to grow at a CAGR of 15.2% from 2022 to 2027; this will be driven by high demand from hyperscalers specifically. On top of that these designs can shorten construction time by up to half compared to traditional methods which is wild and awesome! They like to put them in strategic locations near population centers so they can serve more customers seamlessly while keeping prices low and being able to quickly add more capacity if needed. Dublin, Singapore Amsterdam and Mumbai are some great examples of other cities with huge hubs for hyperscale activity.
By Enterprise Size
Large enterprises are the biggest consumers of data center services, making up over 69% of the global data center market and driving its growth. They utilize digital technologies like cloud computing, big data analytics, and IoT for their operations. That being said, they require a robust support system to ensure efficient use of these technologies. However, building and managing in-house data centers is expensive and complicated. As a solution, businesses are turning to third-party providers who offer scalable, secure and efficient solutions.
There is an increasing amount of data being generated by businesses due to IoT technology, social media platforms and digital transactions. Storing this increasing amount of data requires huge computing power and storage capacity. Large enterprises want agility, scalability, and cost savings which results in rapid migrations to the cloud as workloads are moved there. Cloud service providers such as AWS, Azure & Google Cloud also rely on hyperscale date centers that will improve efficiency by delivering better innovation and customer experience despite operating at massive scale required today.
Large enterprises in the data center market really do play a bigger role than most people think within the cloud sector; comprising 60% total IP traffic by 2022 (up from 53% in 2017) – and projected to generate 60% cloud provider revenues by 2025 (up from 50% in 2021). These companies use an average of around two public clouds along with three private clouds while embracing multi-cloud strategies at rates of around 92%. Furthermore, these large companies have shown future intent with increases in spending such as: spending increases of +35% YoY during Q1-21 & plans indicating further spending increases post-pandemic at around +70%. Their footprint has already grown substantially in just one-year; increasing their usage count by nearly +15%, resulting in more than a thousand unique cloud services utilized today (per company). By 2023, it is projected that half their workloads will already run on the cloud.
By Industry
The ICT industry (information and communication technology) has the potential to play a big role in the data center market. It's projected to hold a revenue share of 33.49%. The most significant end-users of data centers infrastructure are internet, software, and hardware companies in the ICT sector. With digital technologies such as IoT, AI, 5G networks and cloud computing growing faster than ever before, these companies need increasingly more processing power and storage capacity. So much so that they’re driving rapid expansion in construction and leasing activity all over. Today, global internet traffic has grown in size by 20 times since 2010 thanks to streaming services like video streaming, social media sites, and mobile applications. These large ICT companies rely on data centers to store and process this massive influx of data. But out of all the different digital technologies I listed earlier, cloud computing is the main driver behind their demand for more storage capacity. They're migrating workloads away from on-premises infrastructure towards cloud platforms operated by Amazon, Microsoft, Google etc... This is most evident when you see the first quarter year-over-year growth of the global cloud IT infrastructure market at 35%.
Telecom operators around the world data center market are also investing significant sums into creating more data centers to support 5G network rollout. In order for it be successful there needs to be dense computing infrastructure at low-latency applications like remote surgery or autonomous vehicles would never work. As blockchain innovation continues along with machine learning and virtual/augmented reality we are seeing new ways that require specialized data center infrastructure come about every day. Bitcoin mining consumes quite a bit of power just due to its nature alone. Its estimated electricity consumption in 2022 is expected to hit as high as 110 TWh which would be nearly a 20-fold increase since 2016.
When it comes to building and operating data centers it’s really hard for smaller firms to compete with those larger firms that have the backing of the ICT industry. They are able to do it with greater speed and efficiency as well as invest more heavily into renewable energy sources and other sustainable technologies to be able to follow regulations better. Because of this, they’re also now the largest consumer and operator within the global data center market which is changing everything about it.
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Regional Analysis
The data center market in the Asia Pacific (APAC) region is growing at an unprecedented rate, positioning itself to be the world’s dominant hub for data centers within the next decade. This surge has been driven by rapid digitization across the region, including widespread adoption of cloud services, big data, IoT and AI. China is a primary example of this trend, with 64% of global cellular connections in the world's largest IoT market (1.5 billion). Booming internet usage with penetration rates hitting 73% in APAC and high mobile subscription rates have also pushed demand for digital infrastructure from cloud providers and content companies. The significantly untapped potential in many APAC countries provides ample opportunity for growth. By 2023, it’s expected that the region will capture a significant 29.6% of global data center revenue — trailing only North America's projected share of 34.3%.
In APAC, specific markets are emerging as key players: Singapore boasts globally ranking second only to Silicon Valley as the region's main data center hub; Hong Kong holds second place in APAC; Sydney takes third; Shanghai comes in fourth. The APAC data center market is forecasted to reach $32bn by 2023 with over 3% CAGR — though its green data center market grows even faster at over 20.87% CAGR through to 2029.
North America faces supply constraints
Though North America remains dominant now with more than 35.20% revenue share of the global data center market, power shortages and limited land availability are making expansion difficult within core markets. Northern Virginia — currently the world's largest data center hub — has already implemented development pauses in certain areas as utilities struggle to keep up with demand, leaving supply unable to match rapid expansion by major cloud providers amid booming AI adoption. Most new capacity planned for 2023-24 is already pre-leased so smaller users will be left with few options. As such secondary markets like Portland, Phoenix and Columbus are gaining traction as operators seek alternatives. However, overall supply is expected to remain constrained through 2024. Despite these challenges North America is still poised to capture 34.3% of global data center revenue in 2023 — ahead of APAC for now — with the US market alone set to reach $75.4bn by 2027 (Potential). Sustainability is also becoming a growing concern as data centers consume around 1-2% of total electricity in the US, so investments in renewable energy and efficiency measures are being prioritized.
APAC and North America go in opposite directions, as we've seen. It's likely that this trend will continue on into the near future. APAC is expected to grow even faster than it already has been, thanks to untapped markets, digitization at a record pace, and government funds. North America doesn't have such an opportunity due to its mature market, but they'll still need to find solutions for their supply problems and sustainability issues. There are a lot of opportunities in APAC for investors and operators looking to gain footholds in emerging markets like China and India. In North America, businesses need capacity in key locations if they want any shot of success. Regardless of where you look, the industry is expected to grow thanks to the rapidly increasing need for digital transformation all over Earth. That being said, each region offers its own challenges that require adaptable strategies built around an understanding of local market dynamics.
Major Players in Global Data Center Market
Market Segmentation Overview:
By Component
By Type
By Enterprise Size
By Industry
By Region
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