Why smaller data centers are taking off

The sheer volume of digital information in the world is staggering, made only more so by the pace at which it’s growing.

Between 2023 and 2037, the IDC’s Global DataSphere projection expects the world’s data volume to double, forecasting 192 trillion gigabytes of data to be generated globally in 2025 alone.

By then, it’s also predicted there will be three times as many Internet of Things connected devices as there are people on earth.

This increasing weight of data has made data centers one of commercial real estate’s hottest sectors, with 2023 forecast to be another record year for investment, according to JLL.

But as demand rises, attention is shifting to the fastest-growing segment in the sector: edge data centers.

Hyperscale centers are usually located in cities and can typically house 10,000 racks with a capacity in excess of 80 megawatts (MW).

Edge data centers by comparison, have a smaller capacity between 500 kilowatts to 2 MW and, as the name suggests, are located on the outer edge of networks. They bring computing capability geographically closer to those users situated further away from the heart of the cloud.

“These assets are increasingly important to the architecture of computing networks, thanks to the continued adoption of IoT devices and now the rise of generative AI applications, and machine learning (ML),” says Tom Glover, JLL Head of EMEA Data Center Transactions.

The need for speed

Faster compute times – or ‘ultra-low latency’ – has become crucial, as we enter an era filled with data-intensive applications including augmented reality (AR) and driverless cars. And whether we’re meeting online, using ChatGPT or streaming a film, speed and connectivity are what we’ve come to expect.

It’s why in Italy, TV broadcaster RAI recently launched a platform of 18 new edge data centers, covering 20 Italian regions, to reduce latency of content delivery across its network to 5 milliseconds.

“The main functionality of an edge center is not to preserve data, but to complete a task and return results as fast as possible,” says Colm Shorten, JLL’s Global Data Centre Business Development Manager. “They improve connectivity and help move packets of information across a wider net, at higher density and speed.”

And when it comes to business, both the manufacturing and energy sectors have some of the largest demand for edge computing, with much of the data being machine-to-machine generated thanks to increasing levels of digitization and automation.

“The digital world never sleeps, making data centers of all sizes critical to the global economy,” says Glover.

In uncertain times, the impetus for becoming a data-driven organization has never been stronger. Forrester estimate that firms driven by data insights, grow on average more than 30% annually, while a recent JLL survey shows hybrid work is resulting in a much greater reliance on technology and real-time data. 

Although currently less than 10% of business data is created and processed at the edge of the network, Gartner suggest that figure will rise to 75% by 2025, leading to a greater need for distributed infrastructure.

“In the near future, we’re likely to need in the region of 10 times more edge sites than hyperscale, enterprise or co-location data centres,” Shorten says.

Market research analysts predict the global edge data center market to grow at a CAGR of 22.1%, reaching US$ 57.8 billion by 2031.

Take I Squared Capital’s latest global infrastructure fund, which is investing $500 million to establish multiple edge platforms in underserved cities and regions across Europe, with 10 initial locations planned for Germany.

In South America, Brazilian telecom operator Megatelecom who provide B2B data transport services, plan to deploy dozens of edge data centers closer to enterprise users.

Small is beautiful

Despite relentless need, the net zero carbon agenda means the sector is facing negative sentiment amid rising social, political and legislative pressures related to the energy required to run and cool the hardware.

It’s even led to moratoriums and restrictions on new developments being imposed in Ireland, Singapore and the Netherlands.

“Difficulties in securing land and sizable sources of power for large centers means we’re seeing huge growth across Europe in secondary markets as demand outstrips supply,” says Glover.

It’s forcing operators to find innovative ways of creating more sustainable infrastructure. Smaller sites could form part of the solution.

U.K. modular data center firm, Sonic Edge, are reducing their environmental impact by utilizing immersion cooling technology and offering customers prefabricated edge units, powered by low-cost, carbon-free energy sources.

They plan to deploy 50 edge pods across regions of the U.K. in partnership with startup, Deep Green, who co-locate modular edge units with swimming pools, using the waste heat generated to warm the water.

When it comes to establishing more edge data centers, it’s not a question of if, but when, says Shorten.

“Lifestyles, work and technology are evolving,” he says, “meaning we have to find sustainable ways to advance the infrastructure to support the rising need for edge computing.”