Paving the Way for Latin America’s Technological Transformation
Introduction
In the ever-evolving digital landscape, data centers play a pivotal role in enabling businesses to thrive. The demand for data center services is on a meteoric rise worldwide, and Latin America, particularly Mexico, is emerging as a key player in this revolution. As a leading provider of project and engineering services, ObyD Group recognizes the potential of advanced technologies in data centers and aims to foster their growth in the region. This article explores the latest trends and investment opportunities in data centers in Latin America, and how ObyD Group can collaborate with clients to build cutting-edge data center projects.
Data Center Trends in Latin America
Latin America is experiencing significant growth in the data center industry. With 672 MW of inventory as of Q1 2023, primarily distributed across Brazil, Mexico, Chile, and Colombia, the region has witnessed a doubling of supply since Q1 2020. Brazil leads this surge, accounting for around 67% of the region’s total inventory.
Despite the rapid development, vacancy rates are declining across Latin America due to strong demand. In Q1 2023, the average vacancy rate dropped to 8.6% from 12.2% in Q1 2022. Notably, Santiago (Chile) and Queretaro (Mexico) exhibit very tight vacancy rates of 3% and 3.1%, respectively. The demand for data center services is high, with most of the new inventory being pre-leased to hyperscalers, indicating persistent demand.
During Q1 2023, there was a slight decline in net absorption compared to the previous year, reaching 62.2 MW in Latin America. However, despite this decline, the demand for data centers in the region remained robust. Notably, net absorption in Latin America has more than doubled since 2020, when the market absorbed 61 MW, accounting for nearly 20% of the total inventory. Over the past decade, the inadequate development of digital infrastructure has compelled both public and private entities to take decisive action in investing heavily in improving connectivity, enhancing data storage capabilities, and expanding access to the internet.
Mexico: A Prime Data Center Location in Latin America
The data center market in Mexico has experienced remarkable growth in recent years, primarily fueled by the increasing demand for cloud computing, big data analytics, and the Internet of Things (IoT). Key factors driving this growth include the widespread adoption of cloud services, the implementation of artificial intelligence (AI), the rise of IoT technologies, the significance of big data, ongoing digital transformation initiatives, the commercial deployment of 5G networks, the thriving gaming culture, and the implementation of smart city projects.
Several industries in Mexico, such as cloud computing, telecommunications, BFSI (banking, financial services, and insurance), and healthcare, along with the government’s shift towards cloud-based solutions, are major drivers for the demand in colocation services.
Among the regions in Mexico witnessing significant data center development, Queretaro stands out as the primary location. However, companies are also expanding their data center operations to regions like Bajio and Guadalajara, indicating the growing reach and significance of the data center market in the country.
Challenges and Opportunities in the Mexican Data Center Market
The thriving data center market in Mexico presents promising opportunities, but it also comes with its fair share of challenges. One of the major challenges faced by data center operators is the increasing demand for power. As more companies and industries embrace digitalization and data-driven technologies, the demand for energy-intensive data centers has surged. Meeting this escalating power demand has become a complex task for the Federal Electricity Commission (CFE) and other energy providers. The need to ensure a stable and sufficient power supply to support the growing data center infrastructure is crucial for the continued growth and success of the market.
Moreover, the presence of local hyperscale projects has introduced competition for available power resources. These large-scale data center projects, driven by global technology giants and cloud service providers, require substantial power capacities to meet their extensive computing requirements. As a result, data center providers are vying for the same limited power resources, leading to potential delays in delivering power to newly constructed data centers. This competition poses a significant challenge for data center operators looking to establish or expand their facilities in the region, as they must navigate the power capacity constraints to meet the needs of their clients.
With proper planning, strategic partnerships with energy providers, and efficient utilization of available power resources, data center operators can navigate the challenges and leverage the opportunities in Mexico’s dynamic data center market. By addressing power demand and capacity issues while capitalizing on the growing demand for data center services, industry players can position themselves for long-term success in this thriving market.
The data center industry in Latin America, especially in Mexico, is experiencing significant growth, driven by the rising demand for digital services. With Latin America doubling its data center inventory in recent years, the region presents a promising investment landscape. ObyD Group, with its specialized project and engineering services, is ready to support clients in leveraging these opportunities to develop advanced and sustainable data centers. By collaborating with our clients, ObyD Group aims to lead the way in transforming Latin America’s data center industry and powering the technological revolution across various business sectors.