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The Largest Data Center Projects of 2016 and Some Future Projections for 2017

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The significant investment in the enterprise-class data center continues to outpace every other real estate category. The primary drivers of this growth and data center site selection decisions are the continued trends of cloud computing, customer demand for more content-driven capacity on their devices, and business demand for big data analytics.

In each succeeding year since 2010, the money dedicated to the construction of new data center and colocation facilities is increasing by double digits. This article discusses the different groups and some of the notable projects comprising some of the largest data center projects in 2016 including future expectations for the data center market as a whole.

Cloud computing and social media gains momentum

Revenue from public cloud services, including software and infrastructure, is expected to more than double to $195 billion by 2020 from $96.5 billion for 2016, according to International Data Corp. As such, technology players have poured billions of dollars into increasing their scale and competitiveness in the cloud and social media space. The major cloud competitors and power-hungry social media titans, including Amazon Web Services (AWS), IBM, Google, Facebook, Apple and Microsoft, continue to spend billions in new data centers in the U.S. and worldwide.

According to a recent article in the Wall Street Journal, Google and Microsoft — the two largest challengers to cloud leader AWS—“have [spent] a combined, $52 billion in capital expenditures over the past three years, much of that for massive networks of data centers.”

To provide some scale to the capital being spent, here’s a look at several 2016 projects by these competitors:

  • Google, Clarksville, Tennessee: Spending over $600 million to redevelop a former semiconductor site. While each data center site is capital-intensive, Google has committed almost $11 billion in 2016 toward its cloud operations.
  • Facebook, Fort Worth, Texas Data Center: Expanding, for the second time, this campus where it is slated to spend nearly $1.2 billion in initial infrastructure along with a nearly $1 billion economic incentive package accruing over the next 10 years.
  • Apple, Mesa, Arizona: Building a $2 billion command center for its global data center networks — an amount that is in addition to millions in prior investment on this campus.
  • Microsoft, Mecklenburg County, Virginia: Exceeding $400 million on this expansion, one of the several expansions at numerous U.S. sites.
The wholesale colocation sector also commits major capital for expansions

All major wholesale colocation players are also committing massive sums toward this cloud, social media, and financial sector initiatives that all require secure, scalable and dedicated mission-critical facilities.

“Capital spending in 2017 is expected to top $3.2 billion driven by the top five providers including CoreSite, QTS, DuPont Fabros, CyrusOne, Digital Realty and Equinix,” notes Wells Fargo Securities. These colocation operations are also crucial to the public cloud providers mentioned above since they provide a turnkey solution to ready power in a carrier-neutral, highly secure raised-floor environment.

A few 2016 projects of note:

  • Switch, Grand Rapids, Michigan: Switch announced that it will spend over $5 billion over the next 10 years here at a former headquarters campus. Switch is known for its massive data center facilities such as its 2.5 million-square-foot, 325-megawatt Las Vegas data center and its expandable 1.3 million-square-foot, 130-MW Reno Nevada campus where it will spend over $1 billion,
  • Iron Mountain Information Management, Manassas, Virginia: Iron Mountain is constructing a three-building, 375,000-square-foot $350 million campus. Iron Mountain is a fairly new player in the data center colocation market but a longtime player in secure environments.
  • CyrusOne: CyrusOne in 2016 expected to spend over $650 million across its portfolio of more than 30 sites with a significant portion dedicated to its Chicago campus that includes a sale-leaseback with CME. It is one of the largest enterprise-class colocation operators in the U.S.

Data center traffic is forecasted to surpass 25% compounded growth through 2019, according to the Cisco Global Cloud Index.  Further, the index estimates that hyper-scale data centers are expected to grow from 259 in 2015 to 485 by 2020, which will amount to 47% of all installed data center servers by 2020.

As a result, 2017 and the foreseeable future will include more new data center projects, large capital investments and an increasing awareness of the importance of data center site selection decisions.

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