Global data center demand continues to grow at a fast pace. Data consumption is increasing, with companies feverishly adopting the latest technologies such as Internet of Things, AI capabilities and edge computing, while also preparing for the upcoming deployment of 5G. The North American market maintains its position as a global leader, having absorbed more than 215 megawatts year-over-year through 2018’s third quarter, according to a CBRE report.
One of the largest North American markets poised for massive growth is Canada. JLL research found that as of 2018’s second half, there were 65 megawatts under construction across three big Canadian markets—Montréal, the Greater Toronto area and Western Canada—while another 194 megawatts were in the planning phase. Most of the existing and future product consists of cloud deployments.
Currently, there are more than 450 megawatts deployed across the Canadian market. Montreal-based ROOT Data Center operates Canada’s largest data center, MTL-R2, which can scale up to 65 megawatts. The company’s facilities operate almost entirely on renewable hydroelectric power. In an interview with Commercial Property Executive, AJ Byers, ROOT’s president & CEO, dives into the specifics of the Canadian data center market and reveals his expectations going forward.
What makes the Canadian market stand out?
Byers: Interestingly, the Canadian enterprise market has been behind in cloud adoption, a situation which makes the market poised for enormous growth. Many large cloud companies and hyperscalers have been bringing IT infrastructure to Canada in the last two-three years, which means that Canadian enterprises and government now have true in-country options. Cloud providers are seeing explosive growth because of it, which is in turn resulting in large growth for wholesale data center providers in Canada.
Growth has also been driven on the supply side, where cloud operators are seeing a very attractive financial situation in Canada for their operations. The exchange rate on the Canadian dollar is attractive in the discount it provides for out of country businesses. In Québec, specifically where Montréal is a very hot market, the cost of electricity is very low relative to all the other North American markets and is supplied by 100 percent renewable power sources.
As major players like AWS, Azure and Google Cloud came into the Canadian market more fulsomely, organizations began the migration to the cloud—which we see continuing at a huge rate.
How do you assess a market or location before building or acquiring a new data center?
Byers: At ROOT, we have a 125-point checklist which includes economic conditions, nearby risks, ability to expand, available power, available space, cool temperatures, low cost green power, workforce and ability to serve a business market.
How does the data center industry respond to investors’ growing interest in them strictly as real estate assets?
Byers: As traditional real estate investments are resulting in lower returns, real estate investors have been looking at other operating alternatives. This includes operating real estate investments like seniors’ residences, or data centers. Data centers have some very similar characteristics to real estate as an investment, due to the long-term relationships customers have with the asset. Real estate investors have brought less expensive capital to the sector, which has allowed for faster growth of many smaller data center players.
With 2019 set to become yet another record-breaking year for the data center industry, how does ROOT plan to tackle potential challenges?
Byers: ROOT remains prepared with a significant amount of capacity available in the Montréal market, over 20MW of critical capacity available across our two locations. ROOT is also preparing for market expansion to meet the demand of our customers and the entire wholesale market. We are building a new greenfield development at our MTL-R1 location, the additional 10MW will increase our total capacity in Montréal to 65MW.
What should we expect going forward?
Byers: AI will continue to develop as a means for operational efficiency and uptime. ROOT innovated the use of AI for downtime risk reduction and we have seen other major players start to follow. We will also see software-defined networks that provide cloud-on-ramps and virtual cross-connects globally. On a more specific note for ROOT, we will continue to work with our vendors to drive lower power usage effectiveness (PUE) and efficiency across the entire platform as new technologies emerge to do so.
We are seeing a continued demand for multi-tier data center implementations based on application. Tier 3 remains the standard for applications that require 100 percent uptime. However, many AI and IoT applications do not require this level of reliability and organizations running these applications appreciate the efficiency of not paying for Tier 3 space. This has driven a new type of demand for Tier 2, 1 and 0 data halls. These lower tier data halls can have much lower PUEs. For example, a tier 0 data hall can have a PUE as low as 1.05. This is evolving and will start to appear through 2019/2020.
Image courtesy of ROOT Data Center