“Cloud adoption continues to grow, with more and more enterprises moving to cloud-based applications and services,” according to Equinix. The REIT cites a projection from IDC that by 2020, about half of all new business software purchases will be of service-enabled software, and cloud software will constitute more than a quarter of all software sold. “However, for companies in heavily regulated industries, such as healthcare and financial services, compliance and regulatory concerns remain top barriers to the adoption of cloud-based applications. Direct access to Salesforce applications inside Equinix enables customers to bypass the public internet, therefore providing reliable connections without the inherent control and security concerns of the public internet.”

As in the year prior, “an enormous amount of activity” stems from pre-leasing in future data center projects, CBRE says. More than 111 MWs of pre-leased capacity is currently under construction and is indicative of the sheer magnitude of leasing being driven by CSPs over the past several quarters. Last year saw only a handful of multi-megawatt-sized transactions that were not cloud-related, according to CBRE's report.

Conversely, CBRE notes that more speculative data center capacity is scheduled for delivery in 2017 than in the past several years. “This increase in capacity should facilitate increased leasing activity in supply-constrained markets,” says CBRE.

Virginia

DENVER—Although a report earlier this month from Colliers International cited 10 up-and-coming industrial hubs that are positioned for the fastest growth, it's a different story in the data center realm. “By a significant margin, the largest data center markets in the US continue to grow at the fastest pace, with demand driven largely by latency requirements, access to interconnection points and proximity to cloud hubs and large population centers,” CBRE says in its fourth-quarter report on the industry.

Net absorption for 2016 totaled 195 megawatts across the major data center markets as tracked by CBRE, slightly below the 200+ MW of absorption in 2015. More than one-third of that 12-month tally was accounted for by a single market: Northern Virginia, which saw net absorption of 84.4 MW. Nearly 98 MW of inventory were added to Northern Virginia's supply in the past year, partly explaining a 170-basis point increase in the market's vacancy rate to 4.6%, although that's still the third lowest among the major markets behind Phoenix (3.1%) and Silicon Valley (4.5%), according to CBRE data.

Although there was a perception of slowing demand in the second half of last year, net occupancy gains across the nation's major data center markets nearly matched the record-high levels established in 2015, says CBRE. “Leasing volume was dominated by a flurry of hyperscale Cloud Service Provider requirements that sometimes reached in excess of 25+ MW each,” according to the firm's report. “Additionally, the rapid enterprise adoption of network-dependent technologies—mobile devices and networks, the Internet of Things, cloud services, content delivery, etc. —is putting a heightened importance on connectivity and bolstering demand in primary markets.”

A case in point is the announcement earlier this week from Equinix. The Redwood City, CA-based data center REIT said it now offers direct and private access to the Salesforce platform via Equinix Cloud Exchange in markets across North America and Europe. Equinix says the dedicated, private connections through the platform allow enterprise customers to benefit from high performance and application reliability while meeting regulatory and compliance concerns typically associated with cloud deployments in certain industries such as government and healthcare.

“Cloud adoption continues to grow, with more and more enterprises moving to cloud-based applications and services,” according to Equinix. The REIT cites a projection from IDC that by 2020, about half of all new business software purchases will be of service-enabled software, and cloud software will constitute more than a quarter of all software sold. “However, for companies in heavily regulated industries, such as healthcare and financial services, compliance and regulatory concerns remain top barriers to the adoption of cloud-based applications. Direct access to Salesforce applications inside Equinix enables customers to bypass the public internet, therefore providing reliable connections without the inherent control and security concerns of the public internet.”

As in the year prior, “an enormous amount of activity” stems from pre-leasing in future data center projects, CBRE says. More than 111 MWs of pre-leased capacity is currently under construction and is indicative of the sheer magnitude of leasing being driven by CSPs over the past several quarters. Last year saw only a handful of multi-megawatt-sized transactions that were not cloud-related, according to CBRE's report.

Conversely, CBRE notes that more speculative data center capacity is scheduled for delivery in 2017 than in the past several years. “This increase in capacity should facilitate increased leasing activity in supply-constrained markets,” says CBRE.