As interest in the deployment of AI and cloud data centers increased in the first half of 2024, both established and emerging markets continued to grow, with absorption looking to exceed 2023’s record levels. Power availability remains the key concern, with developers scouring wide geographic areas for sizeable power options within the next two to three years. Even as supply pipelines grow, demand has continued to race ahead—leading to ever lower vacancy rates across the board.
In the latter half of 2023, absorption rates have either matched or surpassed leasing velocity. As with last year, a significant portion of this absorption consisted of preleased and built-to-suit projects, which accounted for 78% of all delivered projects. Most of this capacity was allocated for hyperscalers, facilitating cloud expansion and supporting both computation and storage for artificial intelligence deployments across various sectors.
Power availability is the greatest consideration for data center developers, with operators seeking two- to three-year delivery times but many encountering over five-year timelines for future power in multiple markets. Where utility providers have been unable to provide power sooner, certain operators have collaborated with power companies to deliver substations, transmission lines or to source micro-grid power. Many of these agreements are now being signed directly with third party energy generation developers with wind, solar, battery storage, natural gas and even geothermal developments moving quickly across markets. Going forward, we expect to see more operators continue to acquire large acreage, high power capacity sites in even more rural markets. Additionally, some operators will begin to work to secure power along longer timelines.
AI data centers are increasingly becoming a significant part of both hyperscale and colocation development pipelines. Plans for AI training facilities primarily focus on large, rural sites that are less dependent on low latency, while AI inference facilities are typically located near major cloud regions. While hyperscalers remain the primary end users in this space, there are several GPU cloud providers entering the user arena with interest in hyperscale-level capacity across the region.
As hyperscale growth persists in both established and emerging markets, expect subsequent developments in newly established data center markets. Providers and investors will increasingly focus on power transmission and the deployment of hyperscale solutions.
Key markets featured in this report include:
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