Scorecard: Looking Back at Data Center Frontier’s 2024 Industry Predictions
It’s important to be accountable for your predictions and projections. At Data Center Frontier, we track our annual forecasts, and report back to our readers about how they turn out.
Last January, we identified the Eight Themes That Will Shape the Data Center Industry in 2024. And as provided by DCF founder Rich Miller, we have to admit that all of our predictions for last year were pretty much on target in being borne out by this year's data center industry.
Since according to their letter, arguably none of Miller's predictions registered as off-base or frankly even much ahead of their time, here's the scorecard for this past year's annual forecast, which registers whether each prediction was a Hit, a Strong Hit, or a Massive Hit.
Watch for our “Eight Trends That Will Shape the Data Center Industry in 2025″ forecast coming soon.
1. The AI Boom Creates a Data Center Space Crunch
PREDICTION: Artificial intelligence is hot. So hot that the AI boom is creating a resource-constrained world, driving stupendous demand for GPUs, data centers and AI expertise. All three are likely to be in short supply in 2024, but none so much as wholesale data center space. Data center developers are effectively out of wholesale data center space in many major markets. Hyperscale users have gobbled up most of the capacity in development. As demand soars, the data center space crunch will create ripples through almost all elements of digital infrastructure, impacting the supply chain, pricing, cooling, design and power infrastructure.
STRONG HIT: This prediction is a solid "Hit," to say the least. There's just no question that this year, the rapid adoption of AI, especially generative AI, has created significantly more demand for GPUs, skilled AI professionals, and data centers. We know that the AI boom has driven hyperscalers such Amazon Web Services (AWS), Google, Oracle and Microsoft to expand their data center infrastructure aggressively for capacity to support AI workloads. Then too, this year many major markets (e.g., Northern Virginia, Phoenix, and Singapore) reported constraints in available wholesale data center space, largely driven by hyperscale demand. Reports from 2024 indicate that data center developers struggled to keep up with the scale and speed of hyperscale leasing, further validating our prediction. The prediction is also strongly borne out as evidenced by 2024 data from leading commercial real estate firms CBRE, JLL, and Cushman & Wakefield.
CBRE reported a 70% year-over-year increase in data center construction in North America's top markets, reaching a record 3.9 gigawatts (GW) in 2024; this surge was attributed to the expanding AI and cloud computing sectors. JLL similarly noted that the exponential progress of AI and machine learning is fueling transformative shifts in data center design, site selection, and investment strategies. To meet the growing computational power demand, hyperscale data centers are projected by JLL to increase their rack density at a compound annual growth rate (CAGR) of 7.8%, reaching 50 kW per rack by 2027, up from the current average of 36 kW. Meanwhile, in terms of the shortage of wholesale data center space, CBRE indicated that vacancy rates in primary North American data center markets dropped to a record low of 2.8% in the first half of 2024, down from 3.3% a year earlier, highlighting the scarcity of available wholesale data center space. For its part, Cushman & Wakefield observed that as interest in AI and cloud data centers increased in the first half of 2024, both established and emerging markets continued to grow, suggesting heightened demand and potential constraints in available space.
Considering this prediction's ripple effects on digital infrastructure, JLL also highlighted how the growing demand for computational power is driving changes in data center design, including increased rack densities, which necessitate advanced liquid cooling solutions to manage higher heat outputs. The reports all concurred that the surge in AI workloads has led to exponentially increased power demand, prompting data center operators to seek locations with reliable and scalable power infrastructure to support high-density computing requirements.
2. Rethinking Power on Every Level
PREDICTION: Utilities are struggling to upgrade transmission networks to support the surging requirement for electricity to power data centers. CBRE recently said that data center construction completion timelines have been extended by 24 to 72 months due to power supply delays. Although the constraints in Northern Virginia have made headlines, power availability has quickly become a global challenge, impacting major markets in Europe and Asia as well as U.S. hubs like Ashburn, Santa Clara, and sections of Dallas and Suburban Chicago. Last year we predicted the rise of on-site power generation, but we’ve yet to truly see this at scale. But data center operators are working on a range of new approaches to power. Expect to see innovations in power continue as data centers seek better visibility into their power sourcing.
MASSIVE HIT: This prediction was a huge "Hit," as evidenced by 2024 data from leading commercial real estate firms CBRE, JLL, and Cushman & Wakefield, and other sources. Throughout the year, data center operators reported facing significant challenges in securing adequate power from utilities, leading to increased interest in adoption of on-site power generation solutions, as reflected by many industry discussions this year. The bottom line on this prediction might be the release of this year's DOE-backed report indicating that U.S. data center power demand could nearly triple in the next three years, potentially consuming up to 12% of the country's electricity, underscoring the urgency for alternative power solutions. In terms of the largest data center markets, VPM and others noted how Dominion Energy is projecting unprecedented energy demand from data centers in Virginia, posing significant challenges for accommodating this industry growth in the coming decades. In a noteable effort to shore up that gap, Dominion Energy, American Electric Power (AEP), and FirstEnergy this year reached a joint planning agreement to propose regional transmission projects across the PJM footprint, aiming to strengthen electric reliability over the next decade.
In terms of utilities struggling with power demand, CBRE this year reported that low supply, construction delays, and power challenges are impacting all markets. For example, highlighting the global nature of power constraints, Querétaro, Mexico, has only 0.6 MW available for new data center projects. JLL noted that power challenges are not dampening record demand for U.S. data centers, and emphasized that while demand is high, power availability remains a critical concern. CBRE's analysis also stated that difficulty in procuring critical equipment could lead to power delivery delays of up to four years, extending data center construction timelines significantly. For its part, Cushman & Wakefield noted that where utility providers have been unable to provide power promptly, certain operators have collaborated with power companies to deliver substations, transmission lines, or source microgrid power. The firm noted that 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.
In terms of on-site power generation adoption, one major example from the past year is Bloom Energy partnering with AEP to deploy fuel cells that convert natural gas into electricity, providing an alternative to overburdened grids. Barron's reported that AEP plans to purchase up to 1,000 megawatts of these cells, with a confirmed contract for 100 MW. In terms of fresh data center nuclear energy initiatives, there have really been too many over the course of the past year to succinctly cite here. The most recent major example is Oklo, the ubiquitous new nuclear start-up backed by Sam Altman, this month entering an agreement with Switch to supply up to 12 GW of electricity for data centers as produced by small modular reactor (SMR) nuclear installations over the next two decades. Last year Oklo also announced it had secured partnerships to provide up to 750 MW of power for U.S. data centers, as just one indication of the industry's steady shift toward factoring in innovative on-site power generation solutions.
All such data points corroborate our prediction, demonstrating that in 2024, utilities are indeed struggling to upgrade transmission networks to meet the surging electricity requirements of data centers. This has led to extended construction timelines, a global impact on major data center markets, and ongoing heavy interest in deploying innovative on-site powering solutions as operators seek better visibility and control over their energy sourcing.
3. Pricing for AI Capacity Will Continue Higher
PREDICTION: Supply constraints almost always show up in pricing, and that will continue to be true in the data center market in 2024, especially if tenants compete to secure limited capacity. As datacenterHawk’s Rhett Gill noted in a recent analysis, "As AI demand continues to grow, it significantly impacts the data center industry's pricing structure." CBRE said pricing for 250 kW to 500 kW requirements rose 16 percent in 2023 and will rise another 10% to 15% in 2024.
HIT: This prediction is a solid "Hit," as evidenced by 2024 data from leading industry analyst firms including CBRE, JLL, Cushman & Wakefield, and McKinsey & Company. McKinsey reported that prices charged by colocation providers for available data center capacity in the United States rose by an average of 35% between 2020 and 2023, with new capacity due to come online in the next two to three years already leased out. In correlating supply constraints and rising pricing, CBRE recently concluded that rental rates in North American data centers were expected to increase further in the second half of 2024 due to rising construction and equipment costs. In a landmark August report this year as mentioned above, CBRE also determined that the amount of data center supply under construction in North America's top markets jumped by about 70% compared to a year ago, to a record 3.9 gigawatts. The CBRE report noted that vacancy rates in primary North American data center markets dropped to a record low of 2.8% in the first half of 2024, underscoring the scarcity of available space. The study saw the surge in data center construction, driven by AI and cloud computing sectors, leading to increased prices for new data centers capable of handling current power needs, further contributing to rising rental rates. Also, CBRE noted that prices for new data centers, which are more capable of handling current power needs, have risen higher than older facilities, reflecting increased demand and limited supply. To cap things off, Wall Street Journal reporting from this past August suggested that data center owners may be regaining leverage over their tech tenants, as demonstrated by rising rents and record-low vacancy rates in primary North American markets.
4. Supply Chain: Relationships Matter More Than Ever
PREDICTION: Delivery dates for data centers have lengthened due to disruptions in the supply chain. Developers want certainty in their delivery timelines and in 2024 will seek to use deeper partnerships and mergers and acquisitions (M&A) to improve the predictability of their supply chain. We may also see creative dealmaking with joint ventures or strategic partnership structures that bring more clarity to equipment procurement and delivery timelines.
STRONG HIT: Our prediction that data center developers would seek deeper partnerships and M&A opportunities in 2024 to enhance supply chain predictability has proven to be a resounding "Hit." Data this year from leading industry scopers including CBRE, JLL, Cushman & Wakefield and others corroborate this assessment, demonstrating that in 2024, data center developers were increasingly engaging in deeper partnerships, mergers, acquisitions, and creative deal structures to mitigate supply chain disruptions and improve the predictability of their delivery timelines. Specifically, in its "North America Data Center Trends H1 2024" analysis, CBRE said it discerned supply chain challenges and extended delivery timelines. However, CBRE also reported that that supply in primary markets increased by 10% (515.0 megawatts) in the first half of 2024 and by 24.0% (1,100.5 MW) year-over-year, indicating significant growth despite supply chain challenges. For its part, in a November 2024 write-up examining how buyouts and mergers are fueling the current data center boom, JLL noted that such moves are being driven by strong demand and limited availability, particularly in the Asia-Pacific region. For its part, Cushman & Wakefield also this year noted that the fast-spreading use of AI, alongside deepening digitization, has led to breathtaking demand for data processing, fueling increased M&A activity in the data center sector, as recorded by The Middle Market in its November 2024 write-up on this topic. Meanwhile, a recent study from Synergy Research also observed that data center-oriented M&A deals were on the rise again in 2024, poised to surpass $40 billion, a milestone the analyst said reflected a trend towards consolidation and strategic partnerships to address supply chain challenges.
5. More Momentum for Modular
PREDICTION: Modular design has become an important element of data center construction, particularly in the delivery of pre-packaged power rooms and cooling equipment. With a limited supply of colocation space and wholesale capacity available, deployment of prefabricated IT modules may become a more attractive alternative. Many of the current modular IT products target the market for edge computing. But for enterprises with real estate and power capacity, placing a module in a parking lot or warehouse may be the shortest path to an AI deployment. These factory-built form factors offer availability and speed-to-market.
HIT: The prediction that prospects for the deployment of modular data centers would gain more momentum in 2024 has proven to be a "Hit." Though modular deployment remained a smaller segment of the data center market this year, activity such as Schneider Electric’s modular projects and startup Armada's modular approach is consistent with our prediction. And while full realization of modular’s potential in solving AI edge deployment needs has not yet been demonstrated at scale, the momentum for edge has been definitely more pronounced than in previous years, with palpably more technology innovations and announcements.
This past year, the modular data center market has experienced significant growth, driven by the industry's need for rapid deployment, scalability, and cost-effectiveness. Specifically, MarketsandMarkets reported that the global modular data center market is projected to grow from USD $29.93 billion in 2024 to USD $79.49 billion by 2030, at a CAGR of 17.7% during the forecast period. Meanwhile, Future Market Insights estimates the market for modular data centers to reach US $135 billion by 2034, with an 18.3% CAGR over the forecast period.
In terms of the advantages of prefabricated modular data center construction, this past June Propmodo reported that prefabricated modular design has reduced construction times, lowered costs, and improved sustainability for many data center developers. Propmodo further noted that one data center company achieved a 20% cost reduction and shortened construction time from 17 to 11 months for a 45-megawatt European facility by utilizing modular components for electrical and cooling systems. For its part, analyzing the adoption of modular designs in data centers in its "Global Data Center Trends 2024" report, CBRE confirmed that high-performance computing demands are driving rapid innovation in data center design and technology to manage rising power density needs; and that modular designs, including prefabricated power and cooling modules, are being adopted to meet these requirements efficiently.
Similarly, JLL in its "Data Centers 2024 Global Outlook" analysis noted that the increasing demand for data centers is leading to innovations in design and construction, with modular solutions being readily explored to enhance speed-to-market and flexibility, particularly for edge computing and AI applications. Meanwhile, an informative article by StateTech Magazine from November 2024 cited an Omdia study which noted how modular data centers integrate essential components for power, cooling, and IT into compact units, allowing for scalability, faster deployment, and flexibility. As also cited by StateTech, a similar Forrester study this year noted how modular data centers can be assembled within a few days or weeks, compared to traditional data centers that may take 12 to 18 months to build, highlighting the modular advantage in rapid deployment scenarios.
6. AI Drives Design Updates for Power and Cooling
PREDICTION: As with the rise of cloud computing, the transition to high-density AI data centers will take several years. This shift will begin in earnest in 2024. Many AI implementations take the form of high-density zones inside facilities designed for cloud-scale density of about 10 to 12 watts per kW, or perhaps even lower. This will change over the next several years, with the emergence of entire facilities optimized for the extreme density of AI workloads, including significant installations of liquid cooling infrastructure. In other cases, facilities might balance AI and cloud workloads.
MASSIVE HIT: This prediction is a massive "Hit." This year indeed marked the beginning of significant shifts in data center design to accommodate the high-density power and cooling requirements driven by AI workloads. In 2024, we know that the data center industry has been actively and rapidly updating designs to accommodate the extreme density of AI workloads, including the implementation of liquid cooling infrastructure and the development of facilities optimized for high-density computing. CBRE for its part has observed all year that the increasing demand for AI and high-performance computing is driving the development of data centers with higher power densities, necessitating significant design updates to accommodate these workloads. And sure enough, the global data center liquid cooling market has this year been widely projected by industry analysts to grow from $5.1 billion in 2024 to $21.73 billion by 2031, driven by the expansion of edge computing, AI, and blockchain applications. Certain industry commenters in fact discerned the rise of AI driving a 9x surge in the deployment of liquid cooling technology. As just one example of the cloud hyperscalers' significant efforts in this area, in December 2024, AWS announced new data center components designed to support AI innovation, which the company said will provide 12% more compute power while significantly enhancing energy efficiency.
7. Air Permitting at Scale is a Hot Potato
PREDICTION: Doing backup power at MegaCampus scale can be complicated. This issue is likely to be felt beyond Maryland, where a state-level regulatory decision created controversy in 2023. To wit, Aligned Data Centers canceled a planned development at the Quantum Loophole campus in Frederick County after the Maryland Public Service Commission limited the company to 70 MWs of generator capacity, rather than the 168 gensets Aligned had requested. One issue was whether the data center generators should be regulated as a power generation station, rather than individual backup power units. As MegaCampuses proliferate, we predicted that the Maryland dispute could be an early indicator of conflicts to come. Air quality boards are wary of new diesel capacity, given growing concerns about fossil fuel emissions and climate change. And while the data center industry is working hard on greener options for backup power, diesel is likely to retain a central role while these new technologies become ready for Internet scale.
HIT: Broader implications from the controversy in Maryland regarding generator capacity remain to be seen, as the groundwork for regulation and greener options is still being laid industry-wide. And yet, we feel this prediction was mainly a "Hit", as a survey of data center industry developments in 2024 indeed indicate that air permitting for large-scale data centers is becoming increasingly complex, particularly concerning backup power systems. In the realm of data center emissions and air permitting issues, as observed in a recent article from Datacenter Dynamics, regulatory hurdles related to air quality concerns, especially related to pollutants like nitrogen oxides (NOx), have led to stricter permitting processes. The article notes that although data centers contribute minimally to overall NOx levels, their potential impact has prompted increased scrutiny of the industry. In terms of the environmental and community impacts of large data centers, a Fall 2024 industry analysis from Gradient Corporation investigated how communities near proposed or existing data centers have raised objections due to concerns about noise, greenhouse gas emissions, and strain on local infrastructure. The piece confirmed that these concerns have influenced permitting decisions and led to more stringent regulatory requirements over the past year. Over the past year we also saw ample evidence of the data center industry responding to regulatory pressures environmental concerns via the adoption of greener backup power solutions. For just one example, notably in February 2024, Caterpillar and Ballard Power Systems introduced advanced hydrogen fuel cell generators designed for data center applications, signaling a move towards more sustainable operations.
An informative article this year from 3BL Media also commented on ways the use of alternative fuels in data centers can impact air permit compliance, and describes how operators are considering options like hydrogen and a range of eco-diesel fuels to align with environmental regulations and reduce their carbon footprints. The article also provides a state-by-state breakdown of data center regulatory requirements for air permitting in major markets. Finally, gathered insights over the past year from leading commercial real estate firms confirm this prediction's "Hit" status. CBRE confirmed that the increasing regulatory scrutiny on data center emissions in 2024 was prompting operators to adopt greener technologies and alternative backup power solutions to meet compliance standards. JLL reported that data center developers are facing longer timelines and higher costs due to the complexities of air permitting processes, especially for large-scale facilities with substantial backup power requirements. Cushman & Wakefield's analysis over the past year also highlighted how environmental regulations are influencing site selection for data centers, with operators favoring locations with more straightforward permitting processes or existing infrastructure that supports sustainable energy solutions.
8. Site Selection Optimizes for Green MegaCampuses
PREDICTION: Site selection requirements are changing, and we will see data centers in new places. And as of 2024, the Green MegaCampus is the hot new form factor for site selection. These projects can require hundreds of megawatts of renewable power, hundreds of acres of land, and access to recycled water. As the criteria become more exacting, finding suitable real estate becomes trickier, especially with scarcity of power and water in key markets. Long-term access to power – particularly the renewable power coveted by hyperscalers - is the coin of the realm for site selection. In major data center markets, this is shifting development activity to new submarkets with transmission capacity to their local grid. It’s also opening doors for secondary markets with abundant land and power to book more data center projects. Sustainability is also prioritizing sites that offer ready access to renewable energy via local generation or access to wholesale markets. Water issues are also playing a role. More change could be on the horizon. In a recent white paper, Schneider Electric notes that 95% of AI capacity now lives in the core of the network, in data centers and HPC facilities. Over the next five years, Schneider projects that AI capacity will become more distributed, as the need for distributed inference shifts 50% of workloads to edge data centers. If Schneider is right, the AI-powered transformation of the data center industry will continue to evolve with speed and scale.
MASSIVE HIT: This prediction is overwhelmingly a "Hit." 2024 witnessed significant developments aligning with our forecasted trends in data center site selection, particularly concerning Green MegaCampuses optimized for AI workloads. As DCF founder Rich Miller went on to note in his April 2024 article on this topic, the industry is well in the throes of a shift toward gigawatt-scale data centers, designed to support the massive oncoming power requirements of AI and also plain-old cloud computing, with a focus on how facilities now in development prioritize access to renewable energy, aligning with sustainability goals. One notable example of this trend came in July 2024, when Crusoe announced plans with Lancium in Abilene, Texas to build an initial 200 megawatt (MW) AI data center, with intentions to expand to a 1.2 gigawatt (GW) clean campus.
In terms of Green Megacampus site selection criteria and trends, no less an authority than CIO magazine noted in an August article how hyperscalers are increasingly selecting sites based on the availability of renewable energy. This article also touched on how Microsoft, Google and steel manufacturer Nucor are exploring nuclear energy options with Constellation, America's largest nuclear plant provider, to meet the hefty demands of generative AI, indicating an unwavering commitment to sustainable power sources. The demand for large tracts of land with substantial power capacity has certainly led to a plethora data center developments announced this year in new, once-less-intuitive regions including swaths of Indiana, Missouri, Mississippi and, in the case of Meta, Alabama and Louisiana. Tract's acquisition of a 2,100-acre site near Phoenix for a $20 billion data center complex is also a prime example of the MegaCampus trend.
For its part last year, Site Selection Magazine's Ron Starner chimed in with a useful article on data centers' secondary market expansion, where abundant resources often exist in contrast to power and land constraints in traditional hubs. The article noted how Microsoft's plans for new data center campuses in New Albany, Ohio highlight this trend. Also interestingly, Cushman & Wakefield this year noted that land costs for data centers decreased to $5.59 per square foot in 2024; however, prices for parcels over 50 acres increased, indicating higher demand and competition for larger sites suitable for AI-capable data centers.
At Data Center Frontier, we not only talk the industry talk, we walk the industry walk. In that spirit, DCF Staff members may occasionally employ AI tools to assist with research for articles and content. The text of this article was created with help from Open AI's GPT-4.
Matt Vincent
A B2B technology journalist and editor with more than two decades of experience, Matt Vincent is Editor in Chief of Data Center Frontier.
