United States Multi-Tenant (Colocation) Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

The United States Multi-Tenant (Colocation) Data Center Market is expected to register a CAGR of 11.04% during the forecast period from 2021 to 2026. The United States is one of the major countries in terms of the number of data centers. The multi-tenant data center leasing activity in the United States has been increasing due to the expansion activities by some of the major hyperscale tenants operating in the country. According to a report by North America Data Center, the leasing activity in the United States was just under 700MW. The number was three times greater than that in 2019 and twice that of 2018.

Key Highlights

• The growing data center traffic in parallel to the rapid technology advancements in areas such as IoT, Artificial Intelligence, among others, is leading to an increase in the data traffic in the country. According to Cisco forecasts, there will be 4.6 billion networked devices by 2023, rising from 2.7 billion in 2018. In addition, smartphones are expected to account for 7% of all networked devices by 2023.
• According to a 2020 United States B2B Small to Medium Business (SMB) survey by Alibaba, 93% of B2B companies pointed out that they were conducting some portion of their business online, up from 90% in December 2019. In addition, manufacturers’ online B2B trade increased 8%, twice the rate of the overall 4% increase in all industries for the same period.
• The rapid digitization in end-user verticals such as government, retail, healthcare, and IT and Telecom, is also expanding the horizon for the multi-tenant market in the country. The government’s digitization strategy is an example that the country is moving towards complete digital operations.
• However, the challenges such as a heightened dependence on regulatory landscape & stringent security requirements have had an adverse impact on the market in the country. The standards such as HIPAA, PCI DSS, and others prevail as standard checkpoints.
• The pandemic resulted in disruptions in construction & expansion plans for colocation service providers. In the short-term, the pandemic has created an uncertainty in terms of construction and expansion timelines. With a direct affect on labor due to lockdowns, the allied crunch caused in the operations was also partly due to stringent guidelines of operations.

Key Market Trends

Healthcare Sector Accounts for Significant Share

• The healthcare industry generates enormous amounts of data. Many healthcare departments are collecting data from clinical trials and several outpatient records to analyze such data and derive meaningful analysis from such data. However, most of the hospitals involved in such data collection are not equipped with relevant infrastructure.
• As a result, many healthcare institutes are facing pressure to reduce the cost structure of a company, to deliver full regulatory compliance and efficient solutions, with constraints about the increasing amount of data being generated. Datacenter collocation provides a suitable alternative to enable cost-saving means for any firm.
• The growing transition of the healthcare facilities to adopt digital processes has been supported by the government. This has presented an influx of new opportunities for the market of multi-tenant data centers.
• For instance, in June 2021, the United States Department of Health and Human Services (HHS) Office of the National Coordinator for Health Information Technology (ONC) announced the establishment of an USD 80 million Public Health Informatics & Technology Workforce Development Program (PHIT Workforce Program) to strengthen U.S. public health informatics and data science.
• The privatised healthcare companies are observed partnering with multi-tenant data center providers for leveraging new capabilities in terms of cloud and space management. In February 2021, Sungard Availability Services announced the completion of a colocation data center for NYU Langone Health. The 1MW facility has 5,000 square feet of raised floor space, 2N redundancy, and utilizes Vertiv’s DSE High Efficiency data center cooling solution. The data center helped NYU Langone manage its space, power and spend more effectively. It also helped the medical center in accessing public clouds and SaaS providers.

Growing Adoption of Cloud Applications is Expected to Drive the Market

• The demand for cloud-based solutions in the country is surging due to the growing application of the technology and consumer propensity toward the cloud, as this technology allows the user to access the data from remote locations as well.
• The increasing realization among companies about the importance of saving money and resources by moving their data to the cloud, rather than building and maintaining on-premise infrastructure, is driving the demand for cloud-based solutions, and hence, the adoption of cloud-based contact centers services is increasing with newly
• According to the Flexera 2020 State of the Cloud Report, several enterprises have agreed that their cloud usage may exceed the planned usage at present, owing to the impact of the COVID-19 pandemic. The enterprises are forced to meet increased demand as online usage grows, resulting in the need for the extra capacity required for current cloud-based applications. Over 59% of enterprises expect that their cloud usage may be significantly higher than planned, and about 50% of small- and medium-sized enterprises (SMEs) expect their cloud usage to escalate.
• In August 2020, The US government announced USD 1 billion in new funding for multidisciplinary AI and quantum computing research hubs. A total of 12 hubs will be funded, each embedded within different agencies of the federal government.

Competitive Landscape

The data center colocation market is fragmented, owing to the presence of many players in the market. Some of the predominant players of the market are Digital Reality Trust, Inc., NTT Communications, IBM Corporation, CyrusOne, Fujitsu Americas Inc., Equinix Networks, among others. Further, with intense competition, many market players are using various strategies to stay ahead of the competition, such as partnerships and developments is one of the strategies which the top players are following to increase their market penetration and strengthen their positions in the market. Recent developments are -

• July 2020: Novva, a data center colocation and wholesale provider entered the market with a USD 1 billion investment and backing from real estate investment firm CIM Group, with the construction of a hyperscale data center campus in Utah. The company plans on offering its clients some of the lowest TCO in the industry for both hub and edge compute while offering adequate service.
• March 2020: Equinix acquired Packet with a USD 335 million investment. The company added Packet’s on-demand server provisioning capability to Equinix’s platform, so that its customers can launch dedicated servers inside Equinix data centers much like they do virtual machines in a public cloud like AWS or Azure.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
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