Frenzied Deal Making Hits North American Data Center Market

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Ephemeral and floaty as the term sounds, explosive cloud computing demand is having some concrete effects on the ground.

During the first half of 2017, the North American data center mergers and acquisitions (M&A) market soared to $10 billion, a new record according to a new report from commercial real estate professional services firm JLL. Data center construction is also on the upswing, jumping 43 percent compared to a year ago.

Last year, Equinix announced it was acquiring 29 data centers from telecommunications giant Verizon, many of them located in North America. The deal, which closed on May 1, carried a price tag of $3.6 billion.

But that figure pales in comparison to a recent deal inked by Digital Realty.

On June 9, the data center operator announced it was acquiring DuPont Fabros and its 12 data centers for a whopping $7.6 billion. The buy will bolster Digital Realty’s presence in Northern Virginia, Chicago and Silicon Valley.

While M&A activity is surging, leasing has quietly returned to normal in the U.S.,” observed Bo Bond, managing director and Data Center Solutions co-lead at JLL, in prepared remarks. “The acquisition of large amounts of server space in the U.S. by cloud companies continues, but is no longer as frenetic as it was in 2016. Data center users are now turning their attention toward filling out their global data center footprint and making technology investments to keep them ahead in a rapidly changing industry.”

Artificial intelligence (AI), which is already having a massive impact on the enterprise software market, will also change how data centers are managed.

After polling data center executives, JLL predicts that over the next two years organizations will invest in AI technologies that help them quickly bounce back in case of an outage and reduce human intervention. Data center operators are also banking on AI to provide on-site predictive analytics, stated the firm.

Automation is also on the rise as businesses embark on efficiency programs. Finally, the industry expects tomorrow’s energy-efficient processors to help reduce power and cooling costs.

“Data center users are investing in systems that will allow them to use their servers more efficiently and effectively. Essential technological advancements like artificial intelligence to anticipate failures and automation to reduce response time are what the industry needs to keep up with today’s digital consumer,” said Mark Bauer, managing director and Data Center Solutions market director at JLL, in a statement.

Pedro Hernandez is a contributing editor at Datamation. Follow him on Twitter @ecoINSITE.