Market Overview

Key Developments

Growth in Northern Virginia remains consistent, though power and legislation headwinds may slow future expansion

Growth persists in Northern Virginia, despite the headwinds from utility providers being unable to meet the rising demand for power in the region. Providers continue to purchase land along the i-95 corridor, pushing development south towards Richmond. Dominion Energy is also navigating the challenges of power transmission and delivery, though the conversation is beginning to encompass more of the power generation side. With the sum capacity totals of proposed data centers planned for the region more than doubling the existing load, understanding where this power generation will come from is paramount to devising a sustainable plan forward for the Northern Virginia data center market.

Loudon County advanced a bill restricting future development of data centers in the region. This would eliminate the 'By Right Zoning' in Loudoun County, and would send all individual proposals to the board for approval. The sentiment by those opposed to development in the area is that while the data center industry brought tax revenue to their communities, future power challenges and ongoing construction projects have burdened the region, with some calling for more stringent requirements for future development.

2Q 2024 Northern Virginia Development Activity:

• Stack expanded its presence in Loudoun County with the acquisition of 36 acres for future development in Leesburg.
• AWS purchased 91 acres in South Manassas, as well as another 6 acres adjacent to the site, bringing their total to 97 acres.
• Rowan Digital secured 151 acres of land in Frederick, MD, where it intends to construct single-tenant data centers.
• After 2Q 2024 ended, Edgecore secured 120 acres for future development in the Culpeper Technology Zone in Virginia, its first data center campus in Culpeper.

Key Developments

PG&E Data Center project pipeline sees large loads requested in San Jose and Hayward

PG&E has released its 2024 Investor Update, revealing a total of 3.5 GW of new power requests from data center providers, scheduled for delivery between 2024 and 2029 in this region. Almost half of the power requested is coming from locations in San Jose, including requests of 200 MW, 500 MW, and 600 MW. One provider is requesting 800 MW in the city of Hayward. The 600 and 800 MW requests come from the same PG&E customer who also has 3 other power requests in the area for PG&E. Near-Gigawatt power requests have recently become the norm in remote, less populated areas, and are now are spreading to more heavily populated areas. Despite the significant power demand from data center providers, another sector is expected to require even more power in the coming years. PG&E forecasts that Electric Vehicles, with an expected load growth of +1.25% to 2%, will contribute more to the load growth through 2040 than data centers, which are projected to contribute 0.5% to 1.5% of growth.

2Q 2024 Northern California Development Activity:

• Samsung Advanced Institute of Technology is planning to open a R&D facility they will call the Advanced Processor Lab (APL). This facility will develop AI chips for Samsung based on RISC-V architecture.
• EdgeCloudLink, Inc. closes on $10M in funding from Hyperwise Ventures. Funds will be used to continue R&D as well as expand global footprint.
• Vantage Data Centers raises $9.2B 2Q '24, which will be combined with EUR 1.5B raised 3Q '23 to fund growth across North America and EMEA.
• Rapidus, a Japanese chipmaker looks to expand to the US, creating a US subsidiary, Rapidus Design Solutions (RDS) with plans to open an office in Santa Clara to serve fabless chip companies developing advanced semiconductors

Key Developments

Battery storage systems making a noticeable impact to California ISO grid

California leads the nation in solar power generation. However, to achieve its current climate goals, the state also needs green energy sources that can operate after sunset. To this end, California has been investing heavily in Battery Energy Storage Systems (BESS). Since 2020, California has installed more battery storage systems than any other region in the world, with the exception of China. As the sun sets and solar power generation decreases, battery power ramps up. These battery systems have started making significant contributions to the power grid. In 2Q '24, battery power regularly contributed 4 GW to over 7 GW of energy to the CAISO grid during peak load times around sunset. This has resulted in a decrease in natural gas usage and energy imports for the state. One of the largest battery storage projects currently under construction in the US is the Bellefield Solar and Energy Storage Farm, located near Los Angeles. Upon completion in 2026, it will add 1 GW of solar power and 1 GW of BESS capacity to California's grid.

2Q 2024 Los Angeles Development Activity:

• Fervo Energy, a startup specializing in geothermal energy, has secured a 15-year deal to supply 320 MW of power to Southern California Edison.

Key Developments

eStruxture sells data center asset to Canadian company, Fengate Asset Management

eStruxture has a 12 data center portfolio consisting of assets across Canada for a diverse set of customers and workload sizes. The partnership deal will keep most of the capital with Canadian based equity, which is consistent with the previous regime. eStruxture has prided its self on being a Canada-based company and strictly serving Canadian markets. With this investment, Fengate may use this as a launching pad to expand their data center footprint. Other investment groups have started with acquisitions of data center companies as launching pads for future investment including Blackstone with QTS and IPI after they acquired Informart Data Centers and T5 Data Centers used that to create Stack Infrastructure. eStructure's experienced team in the Canada region has existing clients and relationships that should give Fengate opportunities to grow naturally.

2Q 2024 Toronto Development Activity:

• Telehouse launched service from three acquired data centers in downtown Toronto with 30 MW combined.

Key Developments

New submarkets emerging on the outskirts of Frankfurt due to high demand and sparse supply

Availability levels continue to decline as pre-leasing activity remains strong with providers looking to develop new locations further afield, bolstered by new real estate and investment players attempting to enter the market. Significant demolition and remediation work will be required on some planned developments which may cause a delay in future projects coming online. The announcement by AWS to open a sovereign cloud region in Berlin will see some workloads migrated out of Frankfurt, creating much needed additional capacity.

2Q 2024 Frankfurt Development Activity:

• Colt DCS has broken ground on the first pre-leased phase of its Frankfurt West II facility. Located adjacent to the provider's West I data center, the development will deliver 32.4 MW of IT load once fully built.
• In an undisclosed deal BlackRock has acquired 50.1% of Mainova WebHouse, a subsidiary of utility provider Mainova.
• Real Estate firm Tishman Speyer acquired an 18.5-acre site in Osthafen from manufacturer Samson AG.

Key Developments

Data center plans for Sharp's Sakai plant highlight the potential of AI data center development in Osaka

Over the course of three weeks in May and June, three announcements were released in Japan regarding Sharp's LCD plant in Sakai, Osaka. First, Sharp announced that it would shut down operations by the end of September and convert the 1.27 million SQM plant into an artificial intelligence data center. In early June, Softbank announced that it had signed an MoU with Sharp to develop a 150 MW data center on a portion of the Sakai plant site. Softbank plans to move quickly by repurposing buildings, electric power supply facilities, and cooling systems at the site, projecting the launch of operations within 2025 and future expansion to 400 MW capacity. A few days later, KDDI, one of Softbank's rivals in the Japan data center industry, announced that it had launched formal discussions with Sharp, Super Micro Computer Inc. and Datasection Inc. toward the joint development at the Sharp Sakai plant of Asia's largest AI data center, utilizing Nvidia chips.

If realized, these two large-scale projects at the soon-to-be-vacated sites could shift the center of gravity for AI data centers in Japan toward Osaka, where land is less expensive than Tokyo and power supply less restricted. The site is located less than 15km to the south of central Osaka.

2Q 2024 Osaka Development Activity:

• Vantage breaks ground on its first data center in Japan. The first of two data centers planned for KIX1 in Ibaraki will deliver 28 MW of the campus' planned 68 MW IT load. The data center is scheduled to begin operations in early 2026.
• NEC opens green data center, NEC Kobe Data Center Phase 3 Building, powered by 100% renewable energy.
• Equinix opens its fourth xScale data center in Japan, the 14.4 MW OS4x, adjacent to OS2x in Minoh city, Osaka.