AI partly to blame for spike in data center costs

With the supply of floor space dwindling further and increased demand for colocation services, analysts are reporting a 15% increase in the asking rates at North American data centers compared to a year ago.

DatacenterHawk in its third-quarter Data Center Market Recap found that data centers added more than 1.4 GW of power worldwide. Roughly 650 MW of that came from the United States, where major markets such as Atlanta, Phoenix, Dallas, and Northern Virginia led the way.

The research firm attributes the year-over-year jump in absorption to the impact of AI requirements, as well as the growth of traditional cloud computing needs across the region. However, the industry is facing challenges, not the least of which is securing enough power.

“Securing power continues to be a challenge for developers, pushing some to the outskirts of primary markets, as well as fueling growth in secondary and tertiary markets. This has led to an uptick in land-banking by companies hoping to secure space and power for future growth,” DatacenterHawk said in its report.

Meanwhile, demand continues to grow, and availability continues to decline. DatacenterHawk found that average vacancy rates across North America have dropped from already low levels, declining from 3.2% in the second quarter to 2.7% in the third quarter.

Vacancy rate is important because that’s the amount of space available for colocation. If a nearby data center has no free space, an enterprise may have to host their equipment further from their office or headquarters than they planned.