The ultimate executive forecast of what the data centre world will look like by 2024
Across the world, executives, investors and even legal leadership are all asking the same question: what will the market look like in five years and what should my business be looking at in the next wave of the data centre construction frenzy?
From the streets of Tokyo, to the sunny seven hills of San Francisco, the world of data centres – retail, wholesale and hyperscale – is facing tremendous changes that are shifting the order of markets, ranks and top players.
Hyperscale eating up colocation business, hybrid prevailing over anything else, cloud on-ramps boosting portfolios, interconnectivity growing by the billions of Dollars, and of course, edge computing, with non-official estimations projecting the deployment of millions of small “data centres” in less than ten years – one number that I’ve been given points out to the need of anything around three to four million to support the rapid growth of connected devices.
There are also many famous studies and research pieces that suggest a tremendous boom in IoT devices in the next few years. 50, 80, 100, 150 billion, all these numbers have been put out to the market. And still, these are potentially fairly shy estimations. Look at the example of Huawei’s latest launch, the AI Cube.
The AI Cube is a direct competitor to Amazon’s Echo, Apple’s HomePod and Google Home devices. An interesting aspect of the 4G ready device, is the ability to connect up to 64 devices to it. Think of light bulbs, washing machines, coffee makers, vacuum cleaners, anything and everything in your house.
In 2018 alone, it is estimated that almost 550 million smart speakers were sold globally. In the coming years, most will be like Huawei’s AI Cube and allow dozens, if not hundreds of devices to be connected.
Add in connected cars, connected cities, connected everything, new connected markets specially in emerging regions, and we easily add up on the highest estimates and possibly more. Of course not everything is so black and white, however, it gives us a good idea of what is becoming the prime source of data that fuels the data centre sector.
As all this transformation happens, consequently, the data centre market will change. Data Economy has attended Structure Research’s Infra // Structure 2019 Summit in Toronto, Canada, where the think tank unveiled some of the most detailed projections of the what the sector will look like in five years’ time.
Here’s a list of the most relevant projections:
- The global colocation market will by 2024 have almost doubled in value when compared to 2018. Last year, revenues hit on the global stage $39.46bn, a value that in the next five years will have grown to $69.76bn. In terms of regional market share, APAC is projected to become the world’s largest market in 2021, when it will overcome North America at $19.88bn vs $19.58bn respectively. From then one, the gap between the regions is only expected to grow and by 2024, APAC will amount to $27.95bn, North America to $23.47bn, EMEA is projected to reach $17.21bn and Latin America will break the $1bn barrier for the very first time in history in 2024, when it is expected to close the year at $1.12bn. This all translates into a global CAGR average of 9.9% for the period of 2018-2024 (Latin America – 18.2%; APAC – 12.2%; EMEA – 11.1%; North America – 6.4%);
- Although expected to grow at a faster rate of 15.7% CAGR of 15.7%, the wholesale market will continue to fall behind the retail market, projected for a CAGR of 6.3%. In 2019, the retail sector is projected to close the year on $28.8bn, which will have grown to $39.2bn by 2024. In comparison, the wholesale colocation market will be December 31, 2019, top around $14.7bn and grow to $30.6bn by midnight on December 31, 2024;
- The three main areas of retail colocation – and respective market value projected for 2019 – are carrier neutral facilities ($16.3bn), network provider-oriented builds ($11bn) and system integrator oriented data centres ($1.5bn). Structure has also projected each of the vertical’s CAGR to 2024, with carrier neutral and network provider oriented growing at 8.7% and 3.5%, respectively to $24.7bn and $13bn in revenues, and system integrator-oriented models decreasing at an average of 1.6% to $1.4bn in 2024;
- As for wholesale, the two top categories are hyperscale and non-hyperscale wholesale. It is in the hyperscale business segment that most growth will take place at a CAGR of 21.8%, compared to a smaller 3.7% for non-hyperscale. This means that by 2024, hyperscale is projected to amount to $23.3bn, whilst non-hyperscale is expected to grow just to $7.2bn on 2019’s values of $8.7bn and $6bn respectively;
- On a side note, remarkably, Structure Research has also captured that hyperscaler habits are shifting slightly, which can drive a lot of business into the hyperscale wholesale players. While for instance AWS prefers to continue to build its own facilities, Microsoft and Google, have both started to lean more towards outsourcing their hosting space. Good news for companies like Digital Realty, which one of its largest contracts is with a hyperscale;
- In terms of square footage, the market will build more with a CAGR of 6.2%, averaging 7.3 million sqf of new colocation data centre floor being brought online per year. By 2024, the global colocation data centre space will account to the equivalent of 1830 football fields, at 140.8 million sqf, up from 1355 fields in 2019 or 104.2 million sqf;
- A similar growth is expected on the power front, with the global colocation market as a whole posed for some significant growth of about 893MW per year on average, a 6% CAGR. This translates into more than 13GW of functional IT load at the closing of 2019, projected to grow to 17.57GW by the end of 2024;
- In terms of regional ranking, North America, which in 2019 is predicted to amount to 45% of all the MW available, is set to drop this leader margin to 40% by 2024, with APAC almost taking the power crown at 39% of all the MW in the world. A 3% growth from 2019. As for EMEA, a 2% shift in the scale, will see the region go from today’s 19% to 21% by 2024. Latin America will reach 2% from its current 1%. On a more niche level, the US will by 2024 continue to be the largest in terms of MWs at 37%, followed by Western Europe (16%), East Asia (13%) and China (12%);
- A staggering figure unveiled by Structure is the one where it is projected that from the world’s top 15 fastest MW growing markets, nine of them are located in APAC, clearly showing how the region is rapidly becoming the largest in terms of market share. For example, whilst Northern Virginia and London are expected to add the most MW on an yearly basis up to 2024 at 69.4MW and 42MW respectively, Tokyo (32.7MW), Shanghai (31.6MW), Hong Kong (28.4MW), Sydney (27MW), Singapore (22.9MW), Mumbai (21.5MW), Osaka (21.3MW), Beijing (20.7MW) and Guangzhou (19.9MW), are rapidly becoming data centre power houses. Other cities in the Top 15 include Amsterdam, projected to add 34.6MW per year, Frankfurt (27.1%), Phoenix (26.1MW) and Atlanta (21%);
- In terms of the global data centre interconnectivity market – one where Equinix has heavily invested in the past years -, the market was in 2018 worth $2.1bn. Projected to grow at a CAGR of 8% up to 2024, this will be a segment generating revenues of more than $3.3bn;
- Moving now into the market mature index for Europe, for the period of 2019/24, Structure places – in order – London, Amsterdam and Frankfurt as the highest, most mature markets in the Old Continent. Paris sits in the mature segment, but on the edge between high and moderate growth. Cities like Moscow, Milan, Dublin, Vienna, Helsinki, Warsaw, Madrid and Zurich, are all moving from emerging into mature through moderate investment, with Dublin, Vienna and Zurich leading the pack. Stockholm, Oslo, Copenhagen and Reykjavik, are also climbing up to be mature markets, however this is expected to take longer than the previously mentioned destinations due to lower rates of investment and growth. Capitals like Sofia, Prague Luxembourg, Athens and Lisbon also make the maturity index, however, they still mostly sit on the developing side of the table with low growth;
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- In Africa and the Middle East, Johannesburg is clearly the fastest shifting destination, currently still sitting in the developing category, but with moderate growth transporting into the mature category, almost at the same pace of Vienna. Cape Town, Dubai, Durban, Istanbul and Abu Dhabi, are expected to continue to see low market growth and remain in the developing segment;
- And in Asia, the Tokyo Olympic Games of 2020 have aided in the growth of the region’s hosting market both on the colocation and hyperscale fronts to help cope with the increase in data traffic and analytics during the games. Interestingly, as pointed out by Structure’s Jabez Tan, construction of large facilities in Tokyo has now slightly slowed simply because the Government prefers not to have large construction works in the city during the games. Something that is not being felt solely by the data centre industry. Post-games, the market there is expected to see a sudden rise in new builds;
- Mumbai, Osaka, Guangzhou, Seoul Jakarta and Melbourne are the fastest growing Tier 2 markets in the APAC region. Expect many and big builds here on all fronts to support the booming digital economies of each city/nation. Secondary markets like Jakarta, Seoul, Malaysia, will become hotter markets as the infrastructure is decentralised and gives place to the deployment and birth of edge computing destinations;
- Shanghai is today China’s largest data centre market and this is expected not to change by 2024. By the end of 2019, the region is expected to reach 585.4MW of IT load, which is projected to grow to743.6MW by 2024, making it one of the largest on the planet. In comparison, Beijing has in 2019, 358.7MW and in five years is projected to have grown to 462.2MW. It is important to note in these two markets that energy is not always available, and the metro region of each market has also been taking into account on these estimates;
- We have been witnessing over the last months, but things really are about to kick off on the China/West vs West/China front. While Chinese cloud players are expected to continue to build new buildings inside China, they are also expected to do the same outside of the country. Western cloud players are also expected to grow in China, mostly through partnerships and outsourcing contracts. Interestingly, as pointed by Tan, companies like Alibaba for example, will probably be more open to outsource their data centre space in the West to Western operators, whilst more “traditional players like Tencent and Huawei”, are likely to either build their own buildings outside of China or follow other Chinese operators like China Unicom and rent out space at their facilities;
- In India, Mumbai is expected to more than double in size, from 2019’s 129.9MW to 237.2MW by 2024. Expansion will come from all fronts, including local operators, international providers and anyone you can think of. Bengaluru and Chennai will be the country’s second and third largest markets respectively. With a population projected to top 1.4 billion in five years, and less than 100 operational data centres across India, the number of facilities that will be needed to power the country’s growing digital economy, smart cities projects and modernisation of enterprises, is almost undoubtably be a major business boost to most operators in the APAC region and globally;
- Hyperscale cloud platforms are altering the competitive dynamics of Asia. Across the largest markets, the CAGR is above the global average for data centre expansions. Australia’s Sydney and Melbourne when combined, are on a 29% CAGR until 2024. Japan’s Tokyo and Osaka follow at 18%, Hong Kong comes in at 14% and Singapore is at 11%, with some questions yet to be answered about the future of Singapore as a leader in the region as the introduction of data sovereignty laws in many Asian countries start to gain shape;
- Nevertheless, for Structure, “Singapore is arguably one of the most active markets we see in Asia”. Most enterprises there are turning to outsourced colocation models, but it is still possible to find the odd business building their own facility. On the hyperscaler front, Singapore has today 310MW of power being used. About 210MW of self built capacity are on the West part of the city-state due to the Government’s decision years ago to place Singapore’s data centre market on the West region. Of the three data centre regions of Singapore, the West counts for 70% of the capacity, with North amounting the other 30%. Remarkably, the East of Singapore has no hyperscale developments. This is justify by the creation of the mentioned park in the West. However, recent land acquisitions on the East side are potentially going to ignite the expansion of the data centre market in Singapore more towards its airport area. One to watch out, with market rumours suggesting the next names to break ground there are OneAsia, China Unicom and NextDC;
- Hong Kong continues to see market growth as well and this will not change in the next five years as previously mentioned. Hyperscalers continue to move in, and recent land acquisitions are expected to see the erection of large hyperscale facilities on Hong Kong grounds. Shun Cheong Data Center Solutions is reportedly also looking to build a 27MW building in Kwai Chung, projected to be online by Q1 2020. However, the company is not looking at being a data centre operator but looking at leasing it to a colocation provider or hyperscaler. Speaking of hyperscalers, rumour has it that Goodman has sold a land plot to Google in Inzai with capacity for up to 70MW. And Mapletree has both the remaining plots of land rom AWS and Equinix;
- With the conference happening in Toronto, Structure did not left Canada out of the equation and also lifted the veil on a new piece of research focusing on the Toronto region. Expected to turn over $316.2m in revenues in 2019, Toronto is forecasted to grow at a CAGR of 12.3% up to 2024, to $564.7m. MW-wise, today the market amounts to 121MW operated from 68 facilities owned by 40 different providers. In five years, at a CAGR of 12.1%, this will have grown to 213.2MW. By 2023/24, Structure expects a new wave of data centre builds to start taking shape in the city. Today, retail colocation amounts to 72% of the market, with wholesale covering the remaining 28%.