AI and energy scarcity drive new datacenter markets

Energy shortages are driving the development of new datacenter markets and raising rental costs in established markets around the world, according to a recent report by CBRE, a commercial real estate services and investment company operating in more than 100 countries. The study highlights that persistent global energy shortages are significantly inhibiting the growth of the datacenter market in all regions (North America, Europe, Latin America and Asia-Pacific). As a result, secondary markets should attract more investment.

The advance of Artificial Intelligence (AI) is one of the main drivers behind the record levels of demand for datacenters. This trend is driving the emergence of new developments and the conversion of unused industrial space. In addition, in some regions, local governments are integrating renewable energy sources into the grid, and utility providers are modernising their transmission lines.

“The global energy shortage is generating an unprecedented increase in rental prices for datacenter space. In addition, the advance of AI is significantly impacting the demand for datacenters,” says Pat Lynch, managing director of CBRE’s datacenters practice.

In particular, the Asia-Pacific region has seen a sequence of increases in rental prices due to high demand and rising operating and construction costs, despite a relatively large number of new developments. According to the study, the most notable case is Singapore, which has the highest rental prices, exceeding US$ 330 per kW/month.

Investors are now turning their attention to emerging markets in Asia-Pacific such as Mumbai (India) and Seoul (South Korea) to secure datacenter capacity. These markets offer favourable conditions in terms of energy and land, CBRE points out. In the first quarter of 2024, the number of datacenters in Asia-Pacific increased by 22% year-on-year to 2,996 MW. Capacity in the region remains strong, with several developments currently under construction.

Despite energy supply problems, the number of datacenters in North America grew by 24.4% year-on-year in the first quarter of 2024, totalling 807.5 MW in Northern Virginia, Chicago, Dallas and Silicon Valley. Local governments are simplifying permitting and integrating renewable energy sources into the grid.

In Europe, the datacenters market grew by almost 20% year-on-year in the first quarter of 2024. There was significant development in the four main markets – Frankfurt, London, Amsterdam and Paris (FLAP), with Paris leading growth with more than 40 per cent. However, supply shortages persist across the continent, and energy supply remains a major challenge.

The number of datacenters in the Latin American region grew 15% year-on-year in the first quarter, totalling 650.2 MW. São Paulo accounts for 67 per cent of the total in the four main countries. The number of datacenters in Bogotá grew the most (25%).

Capex in datacenters and the liquid cooling boom

Another study corroborates the fact that AI is currently the major driver of investment in datacenters. According to Omdia, capital expenditure (Capex) related to datacenter facilities will grow by almost 30% by 2024. Omdia’s latest “Cloud and Data Center Market Snapshot” report also highlights that Artificial Intelligence is set to become the main server workload within a few years, overtaking databases, analytics and telecommunications.

Furthermore, as a consequence of the increased demand for datacenter hardware, there has been a parallel boom in liquid cooling systems for servers. According to Omdia’s study, single-phase direct-to-chip technology is by far the most popular when it comes to liquid cooling, due to its simplicity and maturity. In comparison, two-phase direct-to-chip technology is currently applied in niches, but has significant growth prospects, according to Omdia’s analysis.

The total revenue of the liquid cooling systems market is expected to exceed US% 5 billion by 2028, surpassing the US$ 2 billion mark that should be recorded by the end of this year.