BLS & Co. Managing Director Tracey Hyatt Bosman provides insights on the growth of the data center market highlighting the increase in demand for data centers, the impact of generative AI key growth markets and challenges in the data center industry. Read more below.

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If you ask Tracey Hyatt Bosman, principal with Biggins Lacy Shapiro, in New York, what she sees occurring in the data center market, you’ll get a swift, succinct response.

“Growth,” said Hyatt Bosman. “There are no surprises there.”

True, data centers and the industry “are getting physically bigger, especially for the Metas and Googles of the world,” she said. “Driving the increase in demand are Artificial Intelligence, industrial automation and online shopping for consumer goods, food and even cars. We’re not on the same consumer usage curve we were on during COVID-19, but all of the signs are pointing forward for data centers.”

Hyatt Bosman offered a distinction between the drivers of today and those seen during the pandemic. “To be clear, generative AI is on a new curve of all its own and it’s anyone’s guess as to how that will develop, but all of the experts are saying to expect dramatic increases that will heighten demand for data centers.”

While citing Northern Virginia as arguably the leading market in the industry, she also cited other key locales. “Chicago is seeing tremendous growth, as are New Jersey, Austin, Dallas-Fort Worth and others.”  

Power Hungry

However, while the overall outlook is rosy, there are still challenges to address.  

The biggest is competition for power. “Data centers are looking for low-cost energy – particularly renewable energy – and lots of it,” Hyatt Bosman said. “They’re looking for solutions of all kinds, including wind and solar, on-site and off-site, and the ability to buy renewable energy credits, especially in the deregulated states.”

Even when data center operators can find available capacity, “they’re frequently hamstrung by unusually long lead times on the interconnection permissions needed to connect into that power,” she said. Another issue is competition for land due to increased demand from other sectors, “notably from the industrial market, since the start of the pandemic in early 2020. That’s when online purchasing spiked and the need for warehouse space did, too.”

Hyatt Bosman said that has led some of the bigger players in the market to take an all-encompassing approach.

“It is spurring investors to lock down large tracts of land and large blocks of utility capacity, with the intent of developing data centers, typically for third-party users,” she said. “The footprints of these sites aren’t compatible with downtown metro environments but rather are located in the more industrial areas in the outer rings of the suburbs and even in more rural areas where more land is more easily available at a better price. However, the sites still need to be proximate to the country’s fiber backbone. You can’t just build a data center anywhere.”

In addition, the data center industry is struggling with the same problems other industries face, including access to construction materials, supply chain issues and finding adequate labor, “so site selectors,” said Hyatt Bosman, “have to deal with that pressure, too.”

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