Data center drought: MSPs scramble for capacity

Data center

Data centerIn the months and years ahead, many IT leaders will urgently turn to managed service providers (MSPs) to help them find IT infrastructure resources to run their workloads. An analysis of the data center colocation market was published by JLL, a provider of commercial real estate services. It finds only 2.3 percent of the more than 15.5 gigawatts of current capacity in North America is currently vacant. This marks a decline from the previous all-time low of 2.6 percent earlier this year. 

Additionally, while more than 7.8 GW of data center capacity is under construction, nearly three quarters of it has already been pre-leased. Data center operators added 2.2 GW of new capacity in the first half of 2025.

Rising AI demand spurs early colocation commitments

Cloud service providers and colocation companies plan to add more than 100 GW of data center capacity between 2025 and 2030. They aim to launch new projects or begin construction to meet growing demand during that period. However, the rise of artificial intelligence (AI) continues to drive demand for additional capacity, and that demand already outpaces available supply.

As a result, IT leaders and the MSPs that support them will need to make decisions further in advance if they want to lease colocation space to deploy their applications. In many cases, organizations are now committing to leasing data center capacity 18 to 24 months ahead of when it might be needed, according to the JLL report. The cost of leasing data center space has risen by 50 percent over the past five years. Colocation service providers expect their revenues to grow by 20 percent annually through 2030. This steady increase in demand and profitability makes a drop in pricing highly unlikely.

Limited capacity and rising costs

JLL projects that data center colocation capacity will reach 42 GW by 2030. Over the next five years, developers plan to break ground or bring online more than 100 GW of combined colocation and hyperscale capacity. The challenge is that cloud service providers already consume the lion’s share of the capacity that colocation service providers offer. In fact, they already account for 65 percent of all data center leasing activity. 

IT leaders and MSPs could, of course, opt to deploy workloads on data centers either built or managed by cloud service providers. That option, however, might prove to be even more expensive than relying on a colocation services provider. In fact, rising deployment costs continue to strain IT budgets. As expenses climb, organizations face limits on how many application workloads they can afford to launch. This financial pressure directly affects their ability to scale.

Hopefully, future technological advances will enable more efficient consumption of IT infrastructure. However, in the absence of such breakthroughs, some organizations may already find it more cost-effective to build their own data centers. This approach offers greater control compared to relying on external services.

Regional growth in data center capacity raises stakes for MSPs

Overall, the region with the most data center capacity remains Northern Virginia, with 5.6 GW, followed by Dallas–Fort Worth, Texas, with 1.5 GW. Developers concentrated more than half of the new capacity in Northern Virginia and Dallas–Fort Worth, Texas, while Chicago, Illinois, and Austin–San Antonio, Texas, contributed much of the remaining growth. Phoenix, Arizona; Chicago, Illinois; and Atlanta, Georgia are driving the most growth in new data center capacity outside Northern Virginia. Other emerging regions include Columbus, Ohio; Salt Lake City, Utah; and Denver, Colorado.

Clearly, there are going to be multiple IT infrastructure challenges ahead. MSPs that have the expertise and knowledge required to successfully navigate these issues will be in high demand. Conversely, those who remain unaware of the issue may find themselves on the outside looking in when they and their clients can’t deploy software as cost-effectively as their competitors.

Photo: Olivia+Cenne / Shutterstock

This post originally appeared on Smarter MSP.