Massive movement of data from private corporate servers to cloud-based solutions and a growing corporate thirst for Internet of Things (IoT) initiatives are pushing corporate demand for data center storage. The result could be that some major cloud providers will have to triple their infrastructure by 2020.

That is one of the findings of the new report, Data Center Outlook from JLL. Still, the report also notes that while data center demand is strong, industry growth could be tempered by external risks such as foreign currency exchange fluctuations, rising interest rates, merger and acquisition disruptions, and policy shifts.

"The data centers market is very fluid, but a few things are certain. Cloud adoption is soaring, technology innovation will not slow down, data center portfolios are consolidating and rack densities are ascending rapidly," says Bo Bond, managing director and data center solutions co-lead at JLL. "Companies needed to start their strategic planning yesterday to have any prospect of staying ahead."

Bond notes that promising new technologies from the big three cloud providers, combined with the expansion of the IoT, are convincing more organizations to migrate to the cloud. JLL anticipates swifter movement to the cloud, forcing the industry's hub markets -- from Silicon Valley and Northern Virginia to London and Tokyo – to go into expansion mode.

“In 2017, data center lease negotiations will be more complex,” the report predicts. “Data center footprints are being reconfigured across the map, with each lease representing an opportunity for data center users to capitalize on hybrid cloud technology, as well as restructuring/right-sizing their colocation footprint. Meanwhile, demand for space at the ‘Edge’ of the network, in lower tier, yet still highly populated markets, will still remain active, offering access to consumers outside the traditional core markets.”

The new U.S. presidential administration creates some uncertainty for the industry's future, Bond explains. “Anticipated energy cost reductions and regulatory oversight could potentially help alleviate the costs of delivering more capacity.”  

Data center leaders are also weighing the potential impact of new federal mandates for data center optimization. These include energy metering and power usage effectiveness requirements that must be met by the end of 2018.

“Cost-saving and efficiency measures can be meaningful for the industry, which consumed roughly 70 billion kilowatt-hours of electricity in 2014 alone,” Bond says. 

Meanwhile, Bond says stricter data sovereignty laws are further complicating the picture for the industry globally. For example, mandates for Canadian companies to store their data on Canadian soil could drastically change the level of data moved to the Canadian cloud.

“Additionally, European data centers continue to grapple with the still-unknown impact of Brexit, which will not be fully realized until London's data center industry is formally removed from the European Union in 2019,” Bond explains.

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