DATA CENTER CONSTRUCTION MARKET ANALYSIS

Market Size and Trends

Global data center construction market is estimated to be valued at US$ 225.87 billion in 2024 and is expected to reach US$ 370.76 billion by 2031, exhibiting a compound annual growth rate (CAGR) of 7.3% from 2024 to 2031.

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The data center construction market is expected to witness significant growth over the forecast period due to  rapid growth in data traffic across the world on account of increased internet penetration, adoption of cloud computing and big data analytics. Moreover, rising demand for efficient and scalable data storage from colocation providers and hyperscale operators is further expected to drive new data center construction projects globally. However, factors such as high initial capital investments and complex approval processes associated with data center development may hamper the growth of the market during the forecast period to some extent.

Demand for Cloud Services

As more organizations adopt cloud computing services, there is a corresponding rise in demand for data center capacity. Companies are shifting their computing and storage needs to the cloud to improve agility, accessibility, scalability and reduce costs as compared to maintaining their own on-premise infrastructure. This transition to the cloud has been a major driver of data center expansion by large public cloud providers such as AWS, Microsoft Azure, Google Cloud and others. These are building massive hyperscale data center campuses across the world to support their cloud platform growth. More capacity is always needed to meet the growing demand from businesses and consumers who are moving their IT workloads, applications, and data to the cloud. Cloud adoption will accelerate in the coming years as digital transformation becomes a priority for businesses. This will translate to continued heavy investment in data center construction by cloud giants.

The benefits of scalability, pay-as-you-go pricing models and eliminating the complexity of managing their own infrastructure have made cloud computing very attractive for organizations. This flexibility allows businesses both large and small to be more agile and innovative while reducing upfront capital costs. As companies store and manage more of their critical data in the cloud, these require cloud providers to ensure near 100% availability through geographically dispersed, resilient data centers. There is pressure on cloud service providers to build new facilities or expand existing ones to handle this growth in cloud workload demand from customers. The ongoing digital disruption and demand for always-on connectivity will ensure cloud remains a key priority and driver of data center investment.

Market Concentration and Competitive Landscape

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Edge Computing and 5G Networks

The rise of edge computing and fifth generation cellular networks are leading to new opportunities for data center construction market growth. Edge computing refers to placing computing, storage and applications closer to the physical location where data is being generated and consumed rather than in centralized clouds. This distributed architecture is driven by the need for ultra-low latency and higher bandwidth for applications like augmented reality, autonomous vehicles, IoT and industrial automation. Roll-out of 5G networks will enable more bandwidth intensive applications that require edge infrastructure deployments. 5G offers super-fast data speeds and very low latency, which is crucial for things like self-driving cars. But to make this happen, we need edge data centers that can handle and transfer data closer to users instead of relying on centralized facilities.

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Market Challenges: Navigating the Landscape of Data Center Construction

Global data center construction market faces several challenges. Existing data centers need constant upgrades and renovations to accommodate new technologies and increased workload demands. Power and cooling requirements are rising exponentially with denser server configurations, placing enormous strain on existing infrastructure. Real estate prices in top data center hub locations continue increasing, driving up project costs. Strict regulatory compliance on energy usage, emissions and waste management requires significant investments. The market remains volatile due to unpredictability of customers' short and long term needs for data center capacity.

Market Opportunities: Exploring the Potential of the Data Center Construction Market

The market also presents substantial opportunities. The rise of cloud computing, big data analytics and digital transformation across industries boosts demand for more data center capacity. The growth of hyperscale cloud providers and 5G network deployments will drive hyper-scale data center builds. Increasing focus on sustainable infrastructure offers prospects in green construction materials and renewable energy integration. 

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Insights, By Tier Type- Increased Scalability and Reliability Drive Growth in Tier 3 Centers

In terms of tier type, tier 3 segment is estimated to contribute the highest market share of 51.0% in 2024  owing to its optimal balance of scalability and reliability. Tier 3 data centers offer enhanced infrastructure resiliency through redundant components like servers, storage, power and networking. These have multiple independent distribution paths serving the IT equipment to ensure continuity of operations in the event of equipment failures or routine maintenance activities. The highly scalable Tier 3 design allows seamless capacity expansion to support growing computing and storage demands from businesses. Their modular architecture incorporating hot-swappable components enables incremental capacity upgrades without any major overhauls or disruptions.

The redundant configuration translates to 99.982% availability, sufficiently high for mission-critical applications. However, the total cost of ownership is significantly lower than Tier 4 centers due to the dual component redundancy instead of multiple levels. This makes Tier 3 an attractive proposition for large enterprises seeking best-in-class reliability at moderate prices. Furthermore, the scalable foundation supports long lifecycles of 10 to 15 years, helping companies optimize infrastructure spend over extended durations. Overall, the perfect blend of high availability, scalability and cost-efficiency has cemented Tier 3's position as the fastest growing segment within the tier type section.

Insights, By Infrastructure-Mechanical Infrastructure Ensures Uninterrupted Operations

In terms of infrastructure, mechanical infrastructure segment is estimated to contribute the highest market share of 63.4% in 2024, owing to its critical importance in maintaining optimal environment for IT systems. Data center operations produce a massive heat load that must be removed efficiently to prevent equipment malfunctions and downtime. Mechanical infrastructure comprising precision air conditioning systems, computer room air handlers, chillers and cooling towers is indispensable for heat dissipation. Redundant system configurations incorporating N+1 or 2N technology ensure uninterrupted cooling even during equipment servicing or breakdowns.

Mechanical infrastructure encompasses monitoring controls that aid in proactive maintenance through sensors for temperature, humidity and differential air pressure. Intelligent monitoring helps optimize energy usage of cooling infrastructure through dynamic load balancing between primary and secondary plants. The high power usage effectiveness augments the overall infrastructure efficiency. Furthermore, mechanical components form a major portion of initial capex for data center builds. Their 20-year lifespan necessitates continued investment to support technology refreshes over time. Thus, the criticality and long replacement cycles cement mechanical infrastructure's top spot. Reliable thermal management underscores continued growth prospects for this segment.

Insights, By End-Use- Growth in IT & Telecom Demand Drives Data Center Construction

In terms of end-use, the IT & telecom segment is estimated to contribute the highest share of 38.2% in 2024 due to explosive data usage worldwide. The widespread use of cloud, IoT, big data analytics, and 5G technologies has dramatically increased the amount of digital data being created and processed worldwide. Hyperscale cloud providers are continuously enhancing their capacities while telecom operators are ramping up their edge infrastructure to support low latency applications for consumers and enterprises. Ongoing digital transformation initiatives across industries are also fueling the need to migrate IT infrastructure and environments to scalable, secure data centers.

Furthermore, IT modernization efforts with big data, AI and advanced analytics require on-premise data centers for localized computing and data sovereignty needs. This presents robust growth opportunities for colocation providers and telehousing services as well. Continued reliance on internet-based services coupled with the explosive growth of data volumes will persist as key drivers for hyperscale builds and telecom infrastructure expansion in the near future. The COVID-19 pandemic has sped up digital adoption, making IT and telecom the leading sectors driving demand for data center construction.

Regional Insights

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North America has established itself as the dominant region with estimated 43.5% market share in 2024. With a heavy presence of major tech giants and cloud service providers, the U.S. accounts for the largest share within the region. The strong demand for cloud and connectivity services from enterprises across sectors has propelled significant investments into physical infrastructure expansion. Leading corporations have embarked on large-scale projects to develop new facilities as well as expand their existing footprint. Moreover, favorable government policies have further encouraged domestic as well as foreign investors to strategically invest in this promising sector. The availability of skilled workforce and stringent protocols also make the region an attractive destination for localized data center deployments.

Asia Pacific, on the other hand, is emerging as the fastest growing regional market. Rapid digitization and rising internet penetration are fueling the growth of bandwidth-intensive applications and online services. This has compelled many global data center operators to look beyond their traditional strongholds and establish presence within developing Asian economies. Countries like China, India, Japan, and South Korea offer a unique value proposition through relatively lower construction costs, tax incentives, and growing consumer demand for cloud-based applications. Their strategic importance as lucrative markets is further emphasized by initiatives like Digital India and Made in China 2025. Meanwhile, stable economic growth, growing middle-class, and improving infrastructure are expected to make Southeast Asian nations vital hubs in the coming years. Overall, the massive untapped potential of the region is attracting considerable investments towards building hyperscale data center parks and interconnected networks.

Market Report Scope

Key Developments

• In May 2023, Data4 Group, a leading France-based company in data center operations and investments across Europe, announced plans to construct a new data center campus on the former Nokia site in Nosée, Essonne, France. The project aims to invest approximately USD 1.1 billion by 2030 to rejuvenate 22 hectares of industrial and office space and reinforce the Group's presence in Paris.
• In April 2023, Microsoft is one of the largest and most influential technology companies in the world. It develops, manufactures, licenses, supports, and sells a wide range of software products, consumer electronics, personal computers, and related services. announced the opening of its latest trusted cloud center in Poland. The cloud region, operated by Microsoft Poland, comprises three physical locations around Warsaw, each housing one or more data centers. This setup ensures that data remains stored within the country, meeting the highest standards of security, privacy, and regulatory compliance.
• In January 2023, TSL, working with U.S. real estate investor Vantage, has secured a contract to build its own data center in Offenbach as part of Vantage's $2 billion plan to construct data centers in Europe. Following the initial construction phase, the Vantage Data Centre will boast a capacity of 16 MW. The campus is slated to feature a total of three multistory data centers, spanning an area of 60,000 square meters, with a maximum IT capacity of 55 MW rated power. In October 2022, Kuko's group K2 teamed up with Sinar Mas to build large-scale data centers in Indonesia. The first project, K2 Data Centre Jakarta 1 Campus, will have four facilities in Greater Jakarta, providing 58.8 MW of IT capacity. The first phase is expected to start operating by early 2024.
• In June 2022, Vantage Data Centers announced plans to establish data center campuses in Poland and Germany. The German facility, covering 13 acres, completed its first building and is set to offer 32MW across 250,000 square feet (24,000 sqm) when fully developed.

*Definition: Data center construction market involves designing, building and renovating facilities that house computer systems and associated components, such as telecommunications and storage systems. This includes constructing server rooms and buildings, as well as installing and configuring cooling systems, power infrastructure, security systems and monitoring tools. The growth of cloud computing, big data and IoT is fueling demand for new data centers and expansions of existing facilities, as companies need more physical infrastructure to store and process digital information.

Market Segmentation

• Tier Type Insights (Revenue, US$ BN, 2019 - 2031)
  • Tier 1
  • Tier 2
  • Tier 3
  • Tier 4
•  Infrastructure Insights (Revenue, US$ BN, 2019 - 2031)
  • Electrical Infrastructure
  • Mechanical Infrastructure
  • Networking infrastructure
  • Others
•  End-use Insights (Revenue, US$ BN, 2019 - 2031)
  • IT & Telecom
  • BFSI
  • Government & Defense
  • Healthcare
  • Energy
  • Others
• Regional Insights (Revenue, US$ BN, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East & Africa
    • GCC
    • South Africa
    • Rest of Middle East & Africa
• Key Players Insights
  • ABB
  • Acer Inc.
  • AECOM
  • Ascenty
  • Arup Group Ltd.
  • Cisco Systems, Inc.
  • CORGAN
  • CyrusOne Inc.
  • Clune Construction Company, L.P.
  • Dell Inc.
  • Digital Realty Trust Inc.
  • DPR Construction Inc.
  • Equinix, Inc.
  • Fujitsu
  • Fortis Construction Inc.
  • Gensler
  • Gilbane Building Company Inc.
  • Hitachi, Ltd.
  • HostDime Global Corp.
  • Hewlett Packard Enterprise Development LP
  • Huawei Technologies Co., Ltd.
  • Hensel Phelps Construction Co. Inc.
  • HITT Contracting Inc.
  • IBM
  • Inspur
  • IPXON Networks