The global demand for data is not showing any signs of slowing. The adoption of remote work, access to digital health care, the opportunity to stream live services, the growing popularity of digital currencies, and businesses shifting to cloud-based platforms are all propelling the data center and telecommunications market forward.
Increased consumer demand is driving data consumption rates, which results in an increase in the number of hyperscale data centers. The centers exceed 5,000 servers and 10,000 square feet, and provide faster network connections and higher bandwidth for large volumes of data.
This type of data center includes business-critical facilities designed to efficiently support robust applications associated with big data-producing companies, including Google, Amazon, Facebook, IBM, and Microsoft. According to Statista’s Energy Demand in Data Centers Worldwide, energy demand by hyperscale centers worldwide hit an all-time high of approximately 87 terawatt hours (TWh) in 2021, up from 31 TWh in 2015 (see chart).
Larger data centers also mean higher consumption rates of water and energy. Data centers are already among the top 10 water-consuming industrial/commercial industries in the U.S., according to Environmental Research Letters. Data centers use 10 to 50 times more energy per floor space than a typical office building, according to the Office of Energy Efficiency and Renewable Energy. These sustainability concerns provide opportunities to engineers as data center owners look to them for alternative design solutions and power sources aimed at reducing a center’s carbon footprint. This could include fresh air cooling techniques and the co-location of solar projects and data centers.
A surge of investment is also expected from the Infrastructure Investment and Jobs Act (IIJA). The broadband market stands to receive approximately $65 billion in funding over the course of five years from IIJA in support of data center and telecommunication infrastructure, coming in second to the largest recipient, transportation.
The broadband grants provision of the IIJA seeks to provide digital equity for “unserved and underserved” locations, as well as for community anchor institutions (CAIs). A CAI could be a school, library, health care facility, public safety entity, college, public housing, or community support organization that facilitates broadband service to vulnerable populations. Priority projects will be identified by Broadband DATA Maps, published by the Federal Communications Commission. Eligible entities for grant funding include public-private partnerships, private companies, public or private utilities, public utility districts, and local governments.
In response to the IIJA, the National Telecommunications and Information Administration established two broadband-focused offices, the Office of Internet Connectivity and Growth and the Office of Minority Broadband Initiatives, which will administer $48.2 billion of funding through the following programs:
Some asset classes in the commercial market have been hurt by the pandemic, while others have profited. Owners of office and hotel space were forced to look to retrofit opportunities to adapt to the aftereffects of the COVID-19 pandemic, while venture capital and National Institutes of Health investments for medical facilities and R&D laboratories soared. The residential market, on the other hand, has led design and construction spending over the last year.
One of the primary trends to watch in the residential market is demographics. The millennial generation is quickly becoming the leading home buyer in the U.S. At the same time, the U.S. is experiencing a shortage in housing inventory due to land availability, zoning constraints, construction workforce shortages, and the cost of materials, including lumber and steel. Rising mortgage rates have also forced the first-time home buying class to look to alternative residences, including multifamily rental properties. According to the 2022 Yardi Matrix Multifamily Report, national average rents were up $19 in June 2022, over $1,700 for the first time (see above chart). Ultimately, inflation and the slowing economy will cause the surge in rent hikes to slow. Rents have recently leveled out but remain above historic levels. For insight into which regions are forecasted to have the best overall real estate prospects and top multifamily markets for 2022, according to Fortune Builders and CREXI, see map above.
The Private Side column in Engineering Inc. focuses on the private-sector markets listed above, and information and insights on economic data relevant to the industry. For more on these topics, subscribe to ACEC’s bimonthly Private Industry Briefs: https://programs.acec.org/industrybrief.
Diana Alexander, CPSM, is ACEC’s director of private market resources. She can be reached at email@example.com.