The data center sector has exploded into a major force in construction, fueled by the increasing demands of artificial intelligence. This surge is significantly boosting nonresidential construction planning, with projections indicating it could add substantially to U.S. economic growth in the coming years.
This data center construction boom hasn’t gone unnoticed in the lighting industry. Some manufacturers are beefing up their product lines for the data center vertical. Some are increasing their marketing to position themselves as leaders in the data center lighting vertical, and some manufacturers are hiring specification salespeople to specialize in just the data center spec market.
Major tech companies are leading the data center expansion with massive investments. Amazon plans to invest $150 billion over the next 15 years, including a $2 billion data center campus in Sunbury, Ohio. Google is also expanding aggressively, with projects like a $600 million facility in Arizona and a $2 billion data center in Fort Wayne, Indiana, along with significant investments in Nebraska. Meta is constructing new data center campuses across multiple states, including a massive $10 billion project in Louisiana.
Microsoft is investing heavily in cloud data centers, with a $3.3 billion project in Wisconsin and $1 billion earmarked for three centers in Licking County, Ohio. Oracle is also expanding its data center footprint, with plans for a facility powered by nuclear reactors, and is part of the Stargate joint venture planning to invest up to $500 billion in AI infrastructure by 2028. These projects highlight the scale and importance of data centers in supporting the future of AI and cloud computing.
The data center industry is also experiencing significant consolidation, with service firms and technology providers capitalizing on the expanding market. Wesco International’s acquisition of Ascent for $185 million exemplifies this trend, enhancing Wesco’s ability to provide comprehensive data center lifecycle services.
Key developments in the industry include:
- Record low vacancy rates: Data center vacancy rates in primary markets dropped to 2.8% in the first half of 2024, with 80% of new construction already preleased.
- Strategic acquisitions: Companies like CBRE and JLL are expanding their technical capabilities through acquisitions. CBRE acquired Direct Line Global, while JLL purchased SKAE Power Solutions.
- HVAC and controls growth: Johnson Controls reported over 20% growth in its data center vertical, with data centers now accounting for 10% of its revenue.
- Strong earnings: Honeywell and Schneider Electric attributed significant earnings growth to their data center operations. Honeywell saw a 25% year-over-year growth in its building solutions segment.
- HVAC focus: Companies like Trane Technologies and Modine are experiencing substantial growth in their data center-related business. Modine reported a 102% year-over-year increase in data center sales.
These developments highlight the rapid expansion and lucrative nature of the data center market, driving companies to invest heavily in acquisitions and specialized services to meet the growing demand from colocation and hyperscale customers.
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