Demand for data center space overshadowed economic uncertainty and concerns around power availability in the first half of the year. Construction of North American data centers is at an all-time high in part due to the continued growth of artificial intelligence, according to the latest data center trend report from CBRE. CBRE researchers found that there is 2,287.6 megawatts (MW) of data center supply currently under construction in primary markets, reaching a new all-time high with more than 70 percent already preleased. At the same time last year, there was 1,830.3 MW under construction. Companies are leasing space up to 36 months in advance of construction completion in anticipation of future demand and to secure data center space at current pricing, said the report. “Data center construction is at an all-time high, driven by strong demand from all users, including AI, hyperscale and enterprise,” said Pat Lynch, executive managing director for CBRE’s Data Centers Solution. “New and existing uses of artificial intelligence cases grew tremendously in the first half of the year, and we expect demand to remain strong with AI driving leasing opportunities in the second half of the year.” Absorption in the eight primary U.S. data center markets (Northern Virginia, Dallas-Fort Worth, Silicon Valley, Chicago, Phoenix, New York Tri-State, Atlanta and Hillsboro, Ore.) remained resilient in the first half of 2023, totaling 468.8 MW despite challenges within the supply chain. While supply increased 19.2 percent year-over-year, vacancy remained near a record low of 3.3 percent. Strong demand paired with a lack of available power and extended timelines have kept asking rental rates climbing, with average primary market asking rents rising to $147.80 per kW/month from $127.50 (a 15.9 percent year-over-year increase). Northern Virginia remained the most active data center market in the first half of 2023 with 918 MW under construction. The market set a record low vacancy rate of 0.94 percent while power improvement projects are underway. Separately, Chicago recorded a 125 percent spike in underconstruction activity – the largest increase among all U.S. data center markets. “Most major markets are grappling with power constraints, and developers are facing challenges within their supply chain, but it’s not slowing down the demand for data center space,” said Gordon Dolven, director of Americas Data Center Research at CBRE. “Data center operators are prioritizing power availability, rather than selecting markets based on traditional factors such as location, connectivity, water and land pricing.” Other market highlights include Dallas-Fort Worth, which saw the greatest year-over-year increase in absorption of 327 percent, jumping to 110.6 MW from 25.89 MW. Hillsboro also experienced the largest inventory growth of all primary markets, increasing to 248.4 MW from 139.4 MW (78 percent year-over-year growth). Internet service provider EarthLink has acquired One Ring Networks, one of the largest fixed wireless providers of voice and data services in the country. The acquisition will allow EarthLink to expand its business platform capabilities and portfolio of products and services including highspeed business internet. One Ring Networks, Inc., with its boutique-type services, holds a significant market share across Arizona, California, Georgia, Maryland and Texas, delivering high-speed, fixed wireless internet service and other communication services to businesses and consumers alike. “This combination represents a compelling opportunity to launch EarthLink’s Business offering and utilize the advances of fixed wireless access (FWA) technology to better serve our customers,” said Glenn Goad, EarthLink CEO. The acquisition will take effect immediately. John Jenkins, president of One Ring Networks, will serve as the newly appointed president of EarthLink Business Services. “Our strategy is simple: continue to expand the best platform in the industry both organically and through further acquisitions across the country to help better serve the large and growing customer base of Earthlink,” said Jenkins. North American Data Center Construction Rises to Record High EarthLink Acquires One Ring Networks CORE COMMUNICATIONS Average Asking Rental Rate with Y-o-Y % Change for Primary Markets Source: CBRE What percentage of your business is derived from the following? Source: TD SYNNEX Resale of hardware 170 160 $kW/month Low High Average Avg % Change 150 140 1.2% -3.2% -4.0% 0.5% -4.4% -1.9% -6.1% -0.4% 14.5% 7.2% -1.9% 130 120 110 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 H1 2023 6% 9% 17% 16% 7% 6% 10% 15% 20% 35% 18% 4%4% 3% 16% 14% 2022 2023 Resale of software Selling your own IP Selling consumption based XaaS Selling product lifecycle services Selling managed services Selling professional services Resale of packaged services 54 CHANNELVISION | SEPTEMBER - OCTOBER 2023
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