Mapping the Best Data Center Locations in 2024

As we progress into 2024, the landscape of data center locations is rapidly evolving, driven by technological advancements, market demands, and geopolitical considerations.

Identifying the best data center locations is crucial for businesses leveraging cloud computing, edge computing, artificial intelligence, and other data-intensive applications.

This article explores the top-ranked data center locations of 2024, emphasizing why these locations are prime spots and highlighting their global significance.

The Importance of the Right Data Center Location

Selecting the best data center location involves evaluating several key criteria to ensure optimal performance, efficiency, and future growth. Each criterion plays a vital role in determining the suitability of a location for data center operations:

• Connectivity and Bandwidth: High-speed internet and multiple fiber providers and routes are essential for minimizing latency and ensuring reliable data transfer. For instance, Northern Virginia, known as "Data Center Alley," has become a top choice due to its dense network of fiber-optic connections, which handle a significant portion of global internet traffic. Another example is the 2Africa subsea cable, recently completed around Africa, which will greatly impact the data center market by vastly improving connectivity and bandwidth, thereby attracting more investments.

• Climate and Cooling: Cooler climates reduce the need for artificial cooling, leading to lower energy costs. Dublin, Ireland, is a prime example, where the naturally cool climate helps minimize cooling expenses, attracting major tech companies like Google and Microsoft. Scandinavia is another ideal data center location due to its naturally cool climate, which significantly reduces the need for artificial cooling, and tech giants like Google and Facebook have invested heavily in countries like Sweden and Denmark to leverage these advantages.

• Energy Availability and Sustainability: Access to renewable energy sources is increasingly crucial for sustainable operations. Frankfurt, Germany, stands out as a key data center hub with its commitment to renewable energy and stringent environmental regulations, ensuring a steady supply of green power. Southeast Asia is also becoming an attractive data center location due to its increasing adoption of renewable energy sources, with countries like Thailand implementing large-scale solar farms, Malaysia integrating solar and hydroelectric power, and the Philippines advancing wind energy projects to power their data centers.

• Political and Economic Stability: Stable regions with clear regulations provide a secure environment for data centers. Singapore is a notable example, offering a politically stable environment and strong regulatory framework, although it now faces space and regulatory constraints pushing new investments to nearby areas like Johor in Malaysia.

• Disaster Risk: To ensure uninterrupted operations, locations with a low risk of natural disasters are preferred. Dallas, Texas, is emerging as a data center hotspot due to its relatively minimal risk of earthquakes, floods, and hurricanes, combined with its central location and robust infrastructure.

• Proximity to End-Users: Proximity to end-users is a critical factor in selecting data center locations, as it significantly impacts latency, service delivery, and overall user experience. Data centers strategically positioned near key user bases, such as manufacturing regions or financial districts, can offer faster, more reliable access to data and services. In some cases, however, many data center workloads are not sensitive to latency and building data center campuses in rural areas is more economical. Workloads like training AI large language models (LLMs), data aggregation and indexing, web crawling, etc., are well suited for a rural data center campus. 

Prime Locations in North America

North America, particularly the US, is the largest market for data centers, driven by its advanced technological infrastructure and high demand for cloud services. Numerous tech giants and a robust digital economy fuel this dominance, ensuring continual growth and investment in data center facilities.

Northern Virginia

Known as "Data Center Alley," Northern Virginia hosts a sizable portion of the world’s internet traffic. The region’s excellent connectivity, competitive energy prices, and favorable tax incentives make it a prime location for US data centers. Due to its strategic positioning and infrastructure, it continues to be a top data center hot spot.

Dallas, Texas

Dallas has been a top data center hot spot and continues to grow due to its central location, excellent connectivity, and relatively minimal risk of natural disasters. The region's competitive energy prices and ample available land also contribute to its attractiveness for cloud data center locations. Texas also produces more renewable energy than any other state, with 146 million MWh in 2023, making up 27% of their energy mix.

Chicago, Illinois

Chicago is seen as a top data center location in the US, housing over 70 data centers, with major players like Equinix, Digital Realty, and CyrusOne driving its prominence. Chicago is regarded as a premier data center location in the US due to its strategic central location, providing low-latency connections across the country, and its robust infrastructure, including reliable power supply and advanced cooling systems essential for data center operations. Additionally, Chicago's extensive fiber-optic network and proximity to major financial exchanges further enhance its attractiveness as a data center hub, ensuring efficient and reliable data transmission for enterprises.

Silicon Valley, California

The home of many tech giants for years, Silicon Valley has always been an appealing market for data centers as many companies prefer to be close to their IT infrastructure. The market isn’t growing explosively, but demand remains high, which allows data center operators to charge premium rates. The market is somewhat of an enigma as it can be costly to operate there, and earthquake risk is high. Santa Clara is the most sought-after locality as its power rates are 20-25% lower than the rest of the Bay Area.

Expanding markets in North America

There are many notable markets that have caught the attention of both cloud and colocation data center builders. What drives them to these markets is a combination of economics, risk mitigation, and required proximity (or not) to customers. Each of these markets has a combination of appealing characteristics, as detailed in the first section above.

EMEA Data Havens

The data center market in Europe is booming, with the FLAP-D region (Frankfurt, London, Amsterdam, Paris, and Dublin) at its core, characterized by low vacancy rates and robust infrastructure. Global players like Equinix, Digital Realty, and AWS dominate the landscape alongside local companies such as Telehouse, DATA4, Atman or Main cubes. Despite stringent EU energy efficiency regulations and increasing demand for sovereign cloud solutions, the market's growth is significant, ensuring compliance and security for data residency requirements.

Despite the current density and variety of data center operators, the ongoing high demand for cloud services is driving further investments and the exploration of new locations, expanding the data center footprint across Europe, Middle East and Africa (MEA). The MEA region is clearly an emerging market with increasing interest from global cloud and colocation companies.

Madrid, Spain

Madrid is rapidly emerging as a significant data center hub in Europe. The city offers a strategic location with excellent connectivity to both Europe, MEA, and Latin America from cable landing stations in the south of the country. Madrid's robust infrastructure, favorable climate for natural cooling, and supportive government policies are attracting major data center investments. Companies like Amazon Web Services (AWS) and Microsoft have announced plans to expand their data center presence in the region.

Berlin, Germany

Berlin is rapidly gaining recognition as a prime data center location, following in the footsteps of Frankfurt, which has long been established as Germany's leading data center hub. Berlin's strategic geographical position in central Europe makes it an ideal location for data centers. Compared to Frankfurt, Berlin offers relatively lower real estate and operational costs, making it an attractive alternative for data center investments. The city also provides various incentives for tech and digital infrastructure investments, including tax breaks and grants. These incentives make Berlin a cost-effective choice for companies looking to establish or expand their data center operations in Europe.

Nairobi, Kenya

Nairobi is rapidly emerging as a data center hub in Africa. Kenya's strategic location, improving infrastructure, and growing tech industry make Nairobi an attractive destination for data center investments. The Kenyan government's focus on digital transformation and supportive policies further boost the city's status as a data center location in Africa. Companies like Africa Data Centers, IX Africa and Digital Realty have established significant operations in Nairobi.

Dubai, United Arab Emirates

Dubai continues to solidify its position as a leading data center hub in the Middle East. The city's strategic location, advanced infrastructure, and supportive government policies make it an attractive destination for data center investments. Dubai's commitment to becoming a smart city and its efforts to diversify the economy through digital transformation are driving the growth of data centers in the region. Major tech companies like Equinix, Oracle and Microsoft have established data center operations in Dubai.

Asia-Pacific's Rapid Growth

The Asia-Pacific region, particularly South-East Asia (SEA), is experiencing remarkable growth in the data center market, driven by rapid digital transformation, and increasing demand for cloud services. Singapore has long been a prominent data center hub due to its strategic location, robust infrastructure, and favorable business environment. However, the city-state is now facing limitations in terms of land availability and stricter regulations on data center operations and energy consumption, prompting businesses to seek alternatives.

Emerging locations like Johor in Malaysia and Batam in Indonesia are rising stars, offering abundant land, favorable regulatory environments, and proximity to Singapore, making them attractive for data center investments. Additionally, India is witnessing substantial investments in data centers, fueled by its large population, burgeoning digital economy, and supportive government policies aimed at enhancing digital infrastructure. These developments are positioning SEA and India as a powerhouse in the global data center market.

Untapped Potential in South America

South America is gradually catching up in the data center market, spurred by increasing digitalization and a growing demand for cloud services across the continent. Countries like Brazil, Chile, and Argentina are witnessing new investments to expand their digital infrastructure.

Brazil, in particular, is leading the charge with significant investments in cities like São Paulo and Rio de Janeiro, driven by its large market size and improving connectivity. Equinix, Ascenty, and Scala are among the many investors in South America's data center market.

This article originally appeared in the Omdia Blog.