Description
The data centre colocation sector continues to grow at a steady pace and hyperscale platforms are a big part of that story. They are driving leasing at historic rates and putting pressure on the limits of connectivity ecosystems with the traffic they are pushing. Hyperscale platforms have always used colocation, but not exclusively, opting to self-build data centres wherever and whenever they can. And that activity has ratcheted up over the years as hyperscalers achieve the scale they need to justify this kind of approach. But the self-build strategy has never followed a linear path, even if hyperscalers have desired it. There are stops and starts and unforeseen circumstances. Time-to-market is a big factor, as is the regulatory landscape, cost structure, resource availability and operating challenges.
There is also a grey area emerging between data centre colocation or turnkey data centres and pure self-builds. The build-to-suit and powered shell models mix elements of colocation and self-build, while there are an increased number of ways for real estate entities to get involved, whether in concert with data centre operators or on a standalone basis. There is an ongoing pivot within the data centre sector to hybrid models and a more narrow focus on land and power procurement, along with entitlement and permitting. The pre-development process is starting to become a business of its own and the value chain involves third party data centre operators, but just not within the framework of traditional colocation and turnkey data centres.
Given the shifting landscape around self-building, one of the big questions facing data centre operators and investors today is how much demand is there still going to be for data centre colocation? Will self-builds take over and leave colocation operators out of the hyperscale value chain? In what global markets are hyperscalers increasing or moderating self-build activity? What are the driving factors and the most salient directional trends? What should we expect to see from hyperscalers as they approach the question of leasing versus building? And how is the rise in AI going to impact the self-build versus data centre colocation calculus and the corresponding demand profile for colocation providers?
This report takes a data-driven approach to answering these and other related questions around the hyperscale self-build data centre landscape. For 2023, Structure Research estimates that the total amount of global hyperscale self-build capacity reached 15.5 Gigawatts (GW) of operational (built-out) capacity. About 73% of that capacity is being represented by the world’s largest four hyperscale platforms: AWS, Microsoft Azure, Google Cloud and Meta. This report is an invaluable resource for any data centre colocation operator, real estate firm, capital group or hyperscale end
