Once a Niche Service Offering, AI Data Centers Emerge as a Major Player
The rapid development of artificial intelligence-powered chatbots and generative AI tools based on large language models (LLMs), such as OpenAI’s ChatGPT, Google’s Gemini, and Anthropic’s Claude, is driving a major shift in the data center property development landscape, with hundreds of new AI data centers now planned.
Deployment of New AI Data Centers is Gaining Speed
Thanks to the rapid growth of AI, all eyes are focused on the fast-rising demand for high-throughput data centers dedicated to serving up AI-based applications.
What’s the reason for the stepped-up demand?
Mostly, it comes down to the AI applications themselves and their exceptionally intensive data processing requirements.
Compared to traditional data center offerings, such as cloud-based data storage or web services, LLM-based chatbots and other related AI systems require significantly higher amounts of computing power, both in terms of unique machine learning hardware (generally sourced from Nvidia) as well as memory usage and bandwidth.
This increased power usage is also driving up the need for increased cooling – generally exceeding the available HVAC system capacity found in legacy data centers.
Property Developers Measure Size of AI Data Centers in Gigawatts of Power Consumption
To quantify the size of these new class of data centers, property developers, investors, and brokers have adopted a new measurement unit – gigawatts of power consumption – to classify the capacity of these new AI data centers.
According to the Wall Street Journal, Microsoft, Google, and Amazon have leased over 2.4 gigawatts of capacity in North America over the past year.
They also quote a report from datacenterHawk that an additional 15 gigawatts of data center capacity are currently in the planning stage, making new data center construction a bright spot in the commercial real estate landscape.
Some of the Biggest AI Data Center Property Development Deals in the US
The market for new AI centers is very hot right now.
- Blackstone has more than $15 billion in data center projects in the pipeline.
- DigitalBridge plans to add 1 to 2 gigawatts of capacity over each of the next five years.
- DigitalBridge and Silverlake have invested in Vantage Data Centers to add more than 3 gigawatts of capacity globally.
- PGIM has plans to invest $3 billion in data centers over the next three years.
- PGIM and IPI Partners are actively seeking to raise billions of dollars in data center-focused funds.
Predictions for the Future of AI Data Centers
If you build it, they will come.
But will they have enough power to keep the lights on?
That’s a humorous way of pointing out that the one risk that could pop the growing AI data center bubble is a lack of available electric power to run the computers and the air conditioning systems that keep them cool.
Indeed, the availability of current and future power capacity (and any government planning restrictions limiting increased power demand) is driving decisions about where to locate new data centers.
It’s hoped that increased renewable energy capacity can mitigate the need to use fossil fuels to power the AI revolution.
Liquid cooling is another solution that PGIM is looking at, it would allow excess heat to be extracted and used to heat nearby commercial buildings – at least in the colder months.
Despite the power supply issues, AI data center developers are bullish on the market. They expect to be able to charge higher rents that are commensurate with the higher-level infrastructure they are offering – and it doesn’t hurt that the target customers, e.g. AI tech companies, seem eager to pay higher rates to bring more and more high-demand AI-based services to market.
Developers are also optimistic that they may have only scratched the surface of what will be a growing AI data market, given that many companies are currently testing their AI systems and will, more significantly, add more AI data center capacity when they do full deployments.
Formaspace is Your Data Center Partner
If you can imagine it, we can build it, at our Austin, Texas, factory headquarters.
Talk to your Formaspace Sales Representative or Strategic Dealer Partner today to learn more about how we can work together to make your next construction project or remodel a success.
