Colo Space Demand: How Low Can It Go? – JLL Analysis
- Strong demand for datacenter capacity is a positive sign for the economy, but a critical lack of available power is emerging as a major obstacle, perhaps hindering economic...
- The report highlights that while high demand is generally considered healthy, the inability to secure adequate power represents a meaningful bottleneck.
- Currently,the average wait time for a grid connection across North America stretches to four years.
Datacenter Demand surges, But Power Constraints Threaten Growth
Table of Contents
Strong demand for datacenter capacity is a positive sign for the economy, but a critical lack of available power is emerging as a major obstacle, perhaps hindering economic growth and even impacting national security, according to a new report from JLL.
The report highlights that while high demand is generally considered healthy, the inability to secure adequate power represents a meaningful bottleneck. Datacenters are now recognized as critical infrastructure, and restrictive market conditions are ultimately counterproductive.
Power Connection Delays Plague North America
Currently,the average wait time for a grid connection across North America stretches to four years. These power delays are a primary impediment to expanding colocation capacity and meeting the escalating demand.
Global Shortages and Rising Costs
The issue isn’t limited to North America. Demand for datacenter space in Europe also exceeded supply in 2023, with hyperscalers aggressively securing capacity, often pre-leasing facilities still under development.Construction of new European datacenters has been hampered by limited power and land availability.
North American utilities are now requiring considerable upfront deposits for power procurement, increasing the financial burden on colocation developers. Furthermore, US commercial electricity rates have risen by over 20 percent in recent years due to aging infrastructure and record-high electricity demand.
Regional Capacity Growth
JLL data shows Northern Virginia,Dallas,and Atlanta have led capacity additions since 2020,adding 3,975 MW,1,008 MW,and 828 MW respectively. However, Columbus and Austin/San Antonio have experienced the most significant percentage growth – more then four times their initial capacity – though from a smaller base.
Continued Expansion Expected
The North american colocation market is projected to maintain a 20 percent compound annual growth rate (CAGR) through 2030, potentially reaching over 42 GW of total capacity. JLL notes the datacenter market remains a highly favored real estate asset class due to “insatiable tenant demand, limited supply and rising rents.”
Investor Confidence and Future Investment
These findings align with comments from Natalia Akst, managing director for Macquarie Asset Management, at the recent Datacloud Global Congress in Cannes, France. Akst highlighted the “financially attractive” nature of the datacenter market for investors, citing high barriers to entry and customer lock-in as factors contributing to low risk and stable cash flows.
JLL estimates that approximately $1 trillion in datacenter development will be required in North America by 2030,necessitating substantial construction loans and permanent financing.