With the first quarter of 2021 now complete and the second quarter of the year being well underway, datacenterHawk will be taking a look back over the key data center market highlights of 1Q 2021. Here, we’ll be discussing our top takeaways from the quarter, as well as touching upon our expectations for the second. Overall, while 2020 was one of the strongest demand years in the industry, the remaining market fundamentals in 2021 seem to be robust.

Consistent Hyperscale Demand

With 2020 being one of the largest growth periods in the history of the data center industry, many wondered just what the first quarter of 2021 would look like. What we quickly realized is that the expansion of hyperscale users- not just in the United States but in Europe and Asia- would continue to grow. While quarter one of 2021 didn’t see quite as much hyperscale demand in comparison to the previous quarter, demand was still consistent and stable. As we look to the remainder of 2021, we expect to see the continuation of a dual strategy from hyperscale companies who are looking to lease and own their data center portfolio.

The Resurgence of Enterprise Demand

Another key highlight that we can take away from 1Q of 2021 in the data center market is the resurgence of enterprise demand. While you could argue that this is a market by market trend, we view it as being a fairly holistic change. When COVID first hit, things went pretty quiet on this front. Now, there appears to be more RFPs in the data center market for requirements within the enterprise size range. This is an especially encouraging sign in terms of the beginning of 2021 and leaves us optimistic for enterprise demand to continue to grow throughout the remainder of the year.

Key Changes in the North American Data Center Market

Northern Virginia

Once again, Northern Virginia led North America’s data center markets in terms of absorption. One particular change that leaves us feeling optimistic for the growth of this sector is the continuing growth of interest in locations like Manassas, Gainesville, and Leesburg. While most of this area’s demand has historically been placed on Loudoun county, we now see that demand expanding to the surrounding municipalities.

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Phoenix

Phoenix is a particularly interesting data center market in North America for a variety of reasons. In the minds of most, Phoenix can be divided into five different areas: the center of Phoenix, Chandler, Mesa, north of Downtown, and Goodyear. Some of the main advantages that can be found in Phoenix are reasonable costs, a competitive market, and the area’s unique ability to scale over time. While there are other markets with similar characteristics, Phoenix is unique in that its market has been validated by the big cloud providers.

In terms of Q1 of 2021, demand was greater in Phoenix than the previous three quarters combined. This unevenness in demand highlights the “lumpiness” that is commonplace across the data center industry. Due to hyperscale users focused on maturing their portfolio in Phoenix, the area also experienced a significant uptick in leasing in the first quarter of 2021. With many in the industry seeing the potential for Phoenix to grow to be as robust as the Northern Virginia market, 1Q of 2021 certainly encourages such predictions for years down the road.

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Salt Lake City

While there has been a data center footprint in Salt Lake City, it hasn’t been to the scale that we’ve seen in other areas. This last quarter, however, three main providers have built-in Salt Lake City in a way that is attractive to large users and large footprints alike. The Salt Lake City market is also interesting because it’s reasonably priced, has geographic value, and has great tax incentive opportunities.

From a data center development standpoint, we expect to see money poured into the Salt Lake City market over the next five years. This fact is supported by what we’ve seen in Q1 of 2021 in the area. In the last quarter, Salt Lake City emerged as both a strategic location and competitive alternative to other popular West Coast markets. In the future, we anticipate even further development in the area as more and more companies seek to take advantage of the many benefits of the market.

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Growth in the European Data Center Market in Q1 of 2021

One major takeaway from the last quarter, from a European perspective, has been that there has been a decently strong growth period there from a demand and absorption standpoint. In the first quarter of 2021, London had a strong growth period. We also saw a number of additional projects get announced there. This tells us that we’re likely to see some exceptional growth in a market like London within the next three years.

Specifically, European data center markets consistently expanded through the first quarter of 2021, a continuation of the booming year that was 2020. This expansion was evident in both market growth and pipeline growth. In terms of commissioned power, datacenterHawk’s top 5 European markets grew by 2.7 percent quarter over quarter. Additionally, we saw planned power in the top 5 European markets increase by 28.7 percent. This encourages the belief that there will be future demand from large data center users in the European market.

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If you would like to dive deeper into 1Q 2021 North American and European data center data, click here to request access to Hawk Insight.