Real Estate Trends: Small Data Centers
Small data centers, known as edge data centers, are currently experiencing a remarkable resurgence, fueled by the exponential growth of digital data worldwide. Forecasts indicate that between 2023 and 2037, the global data volume will double, reaching a staggering figure of 192 trillion gigabytes by 2025. Furthermore, the number of Internet of Things (IoT) connected devices is expected to triple the number of the world’s population during the same time period.
These edge data centers, unlike their hyperscale counterparts, have smaller capacities ranging from 500 kilowatts to 2 megawatts. They are strategically positioned at the periphery of the grid with the goal of bringing computational capabilities closer to users situated far from the main data centers. Their importance becomes even more evident in light of the rapid adoption of IoT devices and the proliferation of generative artificial intelligence and machine learning applications.
In a world marked by data-intensive applications such as augmented reality and autonomous vehicles, the demand for ultra-low latency has become imperative. Leading organizations such as Italian broadcaster RAI, have undertaken the implementation of multiple edge data centers to drastically reduce latency in content delivery, ensuring an optimal end-user experience.
The manufacturing and energy sectors are also emerging as significant drivers of edge computing due to the increasing need for digitalization and automation. As businesses become increasingly reliant on technology and real-time data, the geographic distribution of infrastructure is poised for substantial expansion.
Market analysts and experts make bullish predictions for the global edge data center sector, forecasting a significant Compound Annual Growth Rate (CAGR) of 22.1%. By 2031, this growth trajectory is expected to culminate in a market value of $57.8 billion. Leading investment firms, such as I Squared Capital, are actively investing in edge platform solutions, especially in the European market.
Nevertheless, it is important to acknowledge that data center sector faces sustainability challenges, as there is growing pressure to mitigate carbon emissions. Consequently, certain regions have imposed restrictions on data center development. However, companies are embracing a range of sustainable technologies, including immersion cooling and low-cost, carbon-neutral energy sources, to address these challenges and meet changing environmental standards. In summary, the noteworthy rise of edge data centers can be attributed to the growing demand for data processing capacity, the critical need for ultra-low latency, and the relentless evolution of technology. It is increasingly evident that these demands require innovative and sustainable solutions in the dynamic landscape of real estate investment banking in the data center sector.