Apps. Video streaming. Cloud computing. Social media.
As the business world and people’s daily lives become more web-centric, internet traffic and data production are ramping up at warp speed. It’s a trend that doesn’t seem likely to slow any time soon.
The desire for a fully connected world has led to a myriad of new challenges for the infrastructure that supports an online lifestyle and its attending technologies, not the least of which is the growing demand for data storage space and more sophisticated data centers. The subsequent boom in construction of data centers has created a wealth of new opportunities for HVAC and sheet metal contractors.
Data Generation Scaling Up
The business models of data centers have grown more complex. No longer does a data center serve as just a storage destination. Thanks to the cloud and advanced fiber optic technologies, data service providers offer huge bandwidth connections to companies whose business models rely on performance and convenience of connectivity.
Hyperscale online applications such as Netflix, Amazon, and Facebook are contributing to the explosion in data usage, requiring these companies to purchase storage capacity in significant enough blocks where building their own data centers make financial sense.
According to a white paper published by the market intelligence firm International Data Corp. in 2017, the “sum of all data created, captured, and replicated” around the world will reach 163 zettabytes by 2025, which is equivalent to 10 times as much data as was generated in 2016. (A zettabyte is equivalent to 1,000 exabytes, one of which is equivalent to 1,000 petabytes, one of which is equivalent to 1,000 terabytes, one of which is equivalent to 1,000 gigabytes.)
Meanwhile, the data center business has grown more sophisticated as real estate investment trusts (REITs) emerge as significant players in the sector on both a national and global level. These companies own and manage multiple sites with server space for rent, and they are responsible for some services such as the physical security of the facilities and providing reliable power supplies. Inside each data center, hundreds of customers connect to the internet or one another.
“Microsoft, Apple, Facebook—these types of companies need massive expansion of server space to accommodate what they do,” says Guy Gast, president of the Iowa division of The Waldinger Corp., a mechanical, electrical, and sheet metal contractor based in Des Moines, Iowa, that works on data center development projects.
There are five publicly listed U.S. data center real estate investment trusts (REITs) with a combined equity market capitalization in excess of $70 billion, according to Nareit, an industry trade association: Coresite Realty, CyrusOne, Digital Realty Trust, Equinix Inc., and QTS Realty Trust. They control roughly 35 percent of the global market share of data centers, according to real estate management firm JLL. Nareit data indicates the number of REIT-owned data centers ballooned from approximately 50 in 2006 to more than 230 a decade later. In addition to this growth, companies such as Google, Facebook and Amazon are building their own exclusive data centers across the country.
Not surprisingly, the combination of accelerating demand and an influx of large-scale capital have resulted in the rapid expansion of data center development pipelines. A 2018 analysis by JLL determined that nearly 400 megawatts of data center space are under construction in North America, Europe, and the Asia-Pacific region. (Megawatts of power are used as the benchmark to measure the size of data centers, as opposed to square footage.)
More than 60 percent of the new construction is located in the United States and Canada, according to the report, with markets such as Chicago, Las Vegas, and Toronto leading the way.
Naturally, the growth in planned development is raising demand for the services of contractors.
“We have seen a large increase in data center need and construction in the last 12 months, both locally and nationally—definitely more demand outside of commercial and technology centers,” says Damion Martin, corporate director of marketing with mechanical systems designer ACCO Engineered Systems.
Lane Anderson, vice president for data center development with QTS Realty Trust, a provider of hyperscale and hybrid colocation, describes data center development as “MEP-intensive” relative to other types of commercial building. “It’s the only architecture that’s built for machines, versus a facility built for people to operate inside.”
What are data center developers looking for in their contracting partners? It goes well beyond just price. First and foremost, QTS is looking for a demonstrable track record of quality work in the data center space, according to Anderson.
“It always starts with well-honed systems for the contractors,” he says. “The prime mechanical contractor needs to have a lot of data center experience for a larger project.”
Size and resources are viewed as major keys. Those factors have been emphasized as commissioning and quality control take on greater importance to clients, according to Gast. “There are a lot of pre-qualifying traits that are different from the conventional bid-and-get markets,” he says.
QTS evaluates the workforce limitations of potential partners, according to Anderson. That goes for the number of hands on deck, as well as training and retention.
“We do routinely look at [a potential contractor] and say, ‘I like everything about you, but you may be too small for this job. You don’t have enough retained staff,’” Anderson says. “Typically, once a project starts for us, it doesn’t get smaller, it gets bigger. We don’t want to be 100 percent of a contractor’s capacity. That is not very intelligent.”
Martin cites the need for contractors with the ability to build a “modern and scalable data center” that can work outside the beaten path. “They are looking for companies with depth in both their design and field teams who can support projects outside of main population centers,” Martin says.
High Velocity of Change
Just as technology is evolving, the requirements for cutting-edge data centers are constantly changing as well.
As developers look to grow the amount of data center space available, attention is beginning to shift to innovations in design and usage. Looking ahead, “we can expect to see significant resources dedicated to innovations ranging from efficient cooling systems and servers up to optimized IT functionality and load adjustment,” according to JLL.
“They are continuously improving and upgrading the hardware and components of heating and cooling systems that support data centers,” says Gast, who notes that the high degrees of reliability required of data centers necessitate detailed maintenance and upkeep on an ongoing basis. “They have to work flawlessly forever.”
Contractors are already learning how to deal with these constantly emerging challenges. For example, Martin points out that underfloor cooling systems are falling out of favor with data center owners. That means developers are looking for mechanical systems contractors “with a track record in using more exotic systems that can match the demands of the facility if and when it grows,” he says.
All in all, the business of building data centers won’t get any less complex any time soon.
“You’re aiming for a future target and designing for a facility down the road that could utilize technology that hasn’t been invented yet, and it could house clients that work in different industries with different demands,” Martin says.
JLL Data Center Outlook (Year-End 2017) »
The Waldinger Corporation »
Nareit Data Center REITs web page »
QTS Realty Trust Inc.»