Data center developers added nearly 17 million square feet of new capacity during 2020, deploying new cloud capacity at top speed despite the challenges of construction projects during the COVID-19 pandemic.
Cloud and colocation service providers added 7.8 million square feet during the toughest part of the pandemic in the first half of 2020, according to new data from research firm Omdia. Construction accelerated in the second half of the year, with 9 million square feet of new capacity.
The massive onboarding of new space defied expectations that construction projects would be slowed by social distancing and additional safety measures at construction sites to combat the spread of COVID-19. It also indicates that the data center builders had sufficient inventory of the heavy equipment (especially generators and UPS units) that are crucial to timely delivery.
“Many service providers have said that non-critical data center projects could be delayed, but as far as data centers go in this market, we don’t see many non-critical projects,” Alan Howard, principal analyst in the Cloud and Data Center Research Practice at Omdia. “In fact, if you look at just Amazon, Google and Microsoft, collectively they have announced 28 new regions, most with multiple zones.”
Strong Leasing Drives Need for More Capacity
These companies were strong acquirers of leased data center space in 2020 due to the societal shift to online activity during the COVID-19 pandemic. Several analysts reported record leasing of more than 700 megawatts of wholesale data center capacity in 2020, which quickly absorbed the available inventory in several leading markets, prompting new construction to meet existing demand. Omdia estimates that approximately 57% of the new capacity was brought online by large cloud service providers.
“Cloud and colocation service providers have been benefactors of increased SaaS and network customer demand from the pandemic response necessitating remote working and educating,” said Howard. “These services are particularly recession-resistant and demand for services has been increasing, which translates to data center construction projects remaining in progress to assure they can meet demand.”
Since many large customers pre-lease new data centers before they are built, there is already plenty of demand for the first half of 2021. Omdia estimates around 8 million square feet of new construction will come online in the first six months. CBRE said that 373 megawatts of inventory was under construction near the end of 2020, setting the stage for 13 percent growth for the multi-tenant data center market for 2021.
The Pandemic Presents Challenges for Construction
In the early weeks of the COVID-19 pandemic, it was not clear whether whether cloud computing platforms would be able to deliver capacity to add new users. Multiple industry analyst expressed concerns about whether the pandemic would create delays in construction and supply chain backups.
The nature of construction can require teams to work together in close quarters, and the unfinished nature of job sites can make hand-washing less available than in an office or retail environment. Construction firms are being urged to stage crews to allow 6 feet of space between workers for proper social distancing, and to reduce choke points where workers might need to stand together, such as hallways, hoists and elevators. (See How to Avoid Site Congestion During Data Center Construction for more on this).
While some projects have experienced delays, the Omdia data indicates that data center construction teams have managed to adapt to the new operating conditions and continue to deliver new capacity to support the expansion of digital services.