Generative AI to propel global data centre market growth

The rise of generative AI is set to transform the data centre market, making it one of the asset classes investors should keep an eye on.

According to the latest Data Centres report from JLL, the global data centre industry is poised for rapid growth over the next five years, driven by the increasing demand for cloud storage capacity and the emergence of AI.

“This growth presents significant opportunities for investors and collaboration with developers and operators,” JLL’s Head of Data Centres – Australia, Tom Madigan, said.

The report showed that with the growing demands of AI, data centre storage capacity is tipped to grow from 10.1 zettabytes (ZB) in 2023 to 21 ZB in 2027, a five-year compound annual growth rate (CAGR) of 18.5 per cent. 

A zettabyte is equal to one sextillion bytes. 

This growth will generate a need for more data centres, but also data centres with more energy-efficient designs and locations. 

The need for more power will require data centre operators to increase efficiency and work with local governments to find sustainable energy sources to support data centre needs.

“As consumers and businesses generate twice as much data as in the past decade, the need for data centres and storage capacity is projected to continue growing,” Mr Madigan said.

“Developers and investors are increasingly turning to data centres as a promising asset class.”

He said the rise of generative AI is expected to transform the data centre market, impacting not only the number of new data centres needed but also their design and location which will differ to the existing cloud focused data centres. 

“With the increasing computational power required for AI workloads, data centre operators adapt their facilities to support higher rack densities and specialised infrastructure,” Mr Madigan said.

Mr Madigan said power sourcing and sustainability had become crucial considerations for the data centre industry. 

With data centres and data transmission networks accounting for 1 per cent of energy-related greenhouse gas emissions, operators are under mounting pressure to improve efficiency and procure sustainable power options, the report found. 

JLL’s Senior Director, Industrial & Logistics – Australia, Matt Lee, said the report explored how leading operators were responding to the heightened emphasis on sustainability, with a focus on low-carbon strategies and power purchase agreements (PPAs) for renewable energy.

“Data centre operators are exploring alternative power sourcing strategies for onsite power generation including small modular reactors (SMRs), hydrogen fuel cells and natural gas,” he said.

“Operators are proactively seeking ways to boost efficiency and procure sustainable power options. 

“Our report examines how leading operators innovate in response to the heightened emphasis on sustainability.”