Daniel Thorpe, Associate Director of Data Centre Research at JLL, explores the opportunities opened up by the rapid growth of the edge data centre market.
The global edge data centre market is projected to exceed $317 billion by 2026, a significant increase from last year’s market value of $208 billion, largely driven by the surge in data-dependent technologies such as the IoT and AI.
This expansion is essential for seamless business operations in the future economy, whilst also improving security measures and protecting against potential disruptions. However, despite these advantages, the edge data centre market faces certain challenges, such as managing the complexity of distributed networks and addressing the high costs associated with deploying and maintaining edge infrastructure. With these challenges, however, comes an opportunity for the market to improve energy efficiency, re-distribute energy consumption, and increase support for renewable energy integration while also benefiting new investors in underserved markets.
What’s driving edge data centre demand?
We’ve observed that enterprises typically use a combination of different data centre types, including on-premises, colocation and edge when deploying their IT infrastructure – depending on user needs. However, the continual growth in data and connected devices has driven the need for increased storage, computing, and network capabilities closer to the end-points of use and created a need for edge computing and associated data centres.
The rise of AI has also played a significant role in increasing edge data centre demand. Edge data centres enable organisations to process and analyse data in real time at the edge of the network, facilitating faster decision-making and more efficient operations. AI-driven applications need low latency, and the need for high bandwidth in several sectors has contributed to this demand. If you look at sectors such as the gaming market, it needs ultra-low latency for a seamless experience, and edge data centres provide the infrastructure to support a growing number of cloud gaming users.
High-profile data breaches and increasing cybersecurity threats have made data security even more of a top priority for organisations across many industries. The need for better data security and privacy has also aided edge data centre demand.
Edge data centres, strategically placed closer to these users, are essential for providing the speed and responsiveness needed to support digital services in areas with traditionally limited infrastructure. As internet access expands to more rural and remote regions, it brings with it a massive influx of new users. As a result, we see similar growth in demand for the same low-latency, high-bandwidth applications (streaming, gaming, video conferencing, etc.) that are influencing edge adoption in urban areas.
Markets where there is a high differential in internet penetration rates between urban and rural environments will see the greatest opportunity. Africa and the Middle East are prime examples of this, with a penetration rate of just over 60% for Middle East and 37% for Africa. To capitalise on this growing trend, investors and operators need to establish partnerships with local stakeholders and communities to identify suitable locations and engage with data centre market experts.
The challenges
Despite the promising outlook of growth, the edge data centre market faces certain challenges.
Managing the complexity of distributed networks is a significant hurdle. Unlike traditional centralised data centres, edge facilities require coordination across multiple locations, which can complicate network management and increase operational costs.
Unlike traditional data centres, edge facilities need to be deployed close to where data is generated and utilised, such as factories, smart cities, and research labs. This proximity, while crucial for low latency, often presents development hurdles. These locations may lack the robust power infrastructure, network connectivity, or physical space required for a traditional data centre, demanding innovative adaptation and deployment strategies.
The edge market is a whole ecosystem of companies that includes IT and device vendors, chip manufacturers, telecommunication services providers, data centre operators, cloud service providers and hyperscalers. The competition in the market could pose challenges, as it could lead to aggressive price cuts, potentially squeezing profit margins for smaller players.
Opportunities for growth
The unique demands of edge computing are driving innovation in data centre technologies, benefiting the entire market. Edge data centres require efficient cooling systems to handle higher power densities in smaller spaces. Meeting the diverse demands of edge computing requires collaboration between data centre providers, telecom companies, hardware and software vendors and cloud service providers.
Growth in edge computing is pushing data centre development into new geographical markets, particularly those previously underserved by traditional facilities. This creates opportunities for both established players and new entrants in the market.
In summary, the edge data centre market is poised for explosive growth, driven by the insatiable demand for data processing power closer to end-users. This $317 billion opportunity promises seamless business operations, enhanced security, and new avenues for regional development, creating exciting prospects for investors and operators alike.
As this dynamic sector evolves, there are clear opportunities for growth in improving energy efficiency, re-distributing energy consumption and increase support for renewable energy integration into the wider data centre market.
