The data center construction business has never been healthier. Despite inhibiting factors such as power availability and demands to reduce the carbon footprint, data center growth is fierce and shows no signs of slowing down any time soon.

According to Synergy Research Group, public cloud providers spent $120 billion on building, leasing and equipping data center infrastructure in 2022, up 13% from the previous year. Hyperscalers Microsoft, Google and Amazon Web Services (AWS) all experienced almost 30% revenue growth in their platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) offerings. Their combined data center numbers grew by 15% in 2022, raising their overall data center capacity by 18%.

A big driver, of course, is revenue (and fending off intense competition). Synergy forecasts public cloud ecosystem revenues will double between 2022 and 2026. Over that same period, the number of operational hyperscale data centers is set to jump by 50%.

When you factor Facebook/Meta into the equation, the numbers get even more interesting.

“The biggest hyperscale data center builders are Amazon, Google, Meta and Microsoft, which collectively spent $94 billion on data center capital expenditures in 2022,” said Alan Howard, principal analyst for cloud and colocation services at IT research firm Omdia.

Howard noted several factors may inhibit data center growth, such as increasing macro-economic challenges coupled with massive high-tech layoffs. These have left many concerned about the future of data center spending, particularly physical and IT infrastructure equipment vendors who have become accustomed to ongoing demand for equipment from cloud providers.

“With a broad market sentiment of economic instability and possible impending recessionary times, some hyperscalers have tapped the brakes on data center construction and expansion,” said Howard. “Despite this, hyperscale capex spending plans remain robust.”

From the third quarter of 2022 up through the first quarter of 2023, the big four hyperscalers articulated continued investment in their data center infrastructure in earnings calls, according to Howard. When you tally up the big four, the forecast for 2023 is bullish at $96 billion.

Omdia estimates 26 million more square feet of capacity will come online in 2023 alone for the larger cloud and colocation service providers. Of that demand, 49.5% comes from the big four (with a portion of it from other communication service providers [CSPs]). A further 40% is owned by colocation service providers and 10.5% by telcos that provide cloud or colocation services.

The battle for cloud dominance is adding further impetus for data center build-outs. Omdia predicts that 30 new cloud regions and associated zones are under development or planned. Hyperscalers are in a headlong race to deliver more cloud services in more places at lower latency and higher performance than ever. To do that, they need more data centers situated as close as possible to key markets.

Here are a few of the highlights of what the big four are up to:

• Google has 15 data center projects underway in seven countries.
• Meta had big plans for 18 new projects. But a few months ago it announced a pause to much of its data center construction as there is an ongoing redesign of data centers to be able to handle traditional as well as artificial intelligence (AI) workloads requiring higher power load demand.
• Amazon has 15 data center projects underway in nine countries, with four new regions announced.
• Microsoft has 24 projects underway in eight countries and is adding many new regions.

“Cloud-owned data center building capacity grew by 9.2 million square feet in the second half of 2022, with 100% of that capacity brought to market by Meta, Google, Microsoft, Amazon and Baidu,” said Howard. “It’s not uncommon for a small number of cloud providers to be responsible for all new capacity.”

No matter how rapidly they build, CSPs can’t get data centers operational fast enough. Hence, colocation service providers are heavily relied upon to take up the slack. For the companies covered by Omdia, colocation service providers actually own more data center real estate than cloud providers. According to Omdia, colocation service providers own 37% of total data center building capacity, whereas cloud service providers own 33%.

Colocation service providers added 4.6 million square feet of new data center capacity in the second half of 2022. Omdia data notes that 71% of this capacity was brought to market by a handful of firms: Chindata, QTS, Digital Realty, Iron Mountain, Equinix, DataBank, Flexential and NextDC. Each company brought 200,000 or more square feet to market, with Chindata topping this list with 986,000 square feet.

“Colo SPs typically bring new capacity online within 12 months of an announcement as they have fine-tuned their construction processes and supply chains to achieve accelerated time-to-market,” said Howard. “Repeatable processes, reusable designs, standardized and modular infrastructure, and a close working relationship with their infrastructure equipment supply chains drive just-in-time capacity delivery.”

As more and more enterprises bail from the data center business and let others take care of the function, there is a definite repercussion in facility size and scope. Whereas small-scale data centers used to be common, the average capacity per data center building is now up to 137,000 square feet for cloud and colocation companies. If you take cloud service providers alone, the average capacity is 205,000 square feet.

“Increased enterprise adoption of cloud and [colocation] services continues to drive data center capacity growth in all regions,” said Howard.