Data center vacancies: a digital ghost town

Data centre vacancy rates are a regular topic for data centre analysts. The rate of open space within a working data centre is used as a measure of the strength of the local market, and the opportunity for investors to put funds into new builds.

One of the strongest data centre markets in Europe is in Dublin, which has just an 8% vacancy rate in its data centres.

However, there is a different kind of data centre vacancy: an empty, unused data centre building. With data centre services in such high demand, and a large capital investment required to get one through construction, why are there vacant data centres at all?

Some are the result of poor planning, building data centres in areas without the demand to support their services. In remote Chinese provinces, data centres have been constructed as a way to bolster the local economy and obtain money from government funded programs. But demand in Western China has not been keeping pace with data centre construction, leading to constructed but unused data centres with extremely high vacancy rates.

For example, the city of Jinchang was the former hub of nickel mining for China. But the natural resources of the area were exhausted and Jinchang, located in the middle of the Gobi desert, suffered an economic depression. The city invested 1 billion yuan ($142 million USD) in data centres in 2017, and an additional 2 billion in 2020.

Now the first phase of the project is complete, but only one-third of its operational servers are in use due to sparse demand. More than 60% of the city’s 2500 servers are dormant, waiting for customers to utilize the available capacity.

At the same time, the urban areas in Eastern China are working at capacity. Shenzhen’s capacity is comparable to Dublin’s, remaining below 10% according to a report from IDC. It can be difficult to get approval to build new data centres in the eastern cities, however, as there are concerns with energy consumption and the pressure it places on the local grid. Ironically, the high-vacancy remote locations in China are far better placed for access to renewable energy like, reducing the impact on power grids.

Reducing latency is key to high-speed, reliable connectivity, leading customers to select data centres that are physically located near their operations. The delay in transmission could be only a few seconds or even less – but this minimal difference can be critical, particularly in industries like healthcare, finance, and other important online services.

Even in populated, high-demand areas, you may still find an empty, vacant data centre. This can occur when a data centre business goes bankrupt, and data centre properties and hardware are tied up in legal red tape and financial settlements.

In November 2019, European data centre hosting company ICTRoom filed for bankruptcy, leaving the future of assets – including 250 data centre facilities – uncertain. At the time of the filing, ICTRoom had just finished Phase 1 of a large data centre build, with 2 more phases under construction.

Many data centre facilities are exchanged as private assets, making it difficult to track specific sales. But while the expense of construction speaks to a long-term commitment to own and operate a data centre, the challenges of operations may push some companies toward off-loading owned property and seeking colocation space instead.