After months of lockdowns, social distancing, remote meetings and working from home, widespread availability of Covid-19 vaccines in the US have opened the door for some workers to return to the office.

But for many businesses, the pandemic was the catalyst for a shift toward more flexible work environments. Technology is the great enabler of these new, hybrid workplaces – and as demand for new technology infrastructure and solutions increases, so does the demand for data centers to support them.

Impacts of Covid-19 on data center demand

As businesses navigated the challenges of managing a remote workforce through a pandemic, their needs for digitization and connectivity soared.

At the same time, economic uncertainty constrained organizations’ budgets, resulting in a historic low for IT spending in 2020.

But during the first half of 2021, the top major data center REITs experienced a strong resurgence in enterprise-level demand, driven primarily by a need for data center capacity among financial, technology and healthcare companies.

During the first quarter alone, enterprise demand was up nearly 50 percent compared to the second and third quarters of 2020 for the QTS Realty Trust REIT. 

According to the JLL Data Center Outlook for the first half of 2021, Northern Virginia exhibited the greatest demand with 119 megawatts (MW), while adding 90 megawatts (MW) of multi-tenant data center (MTDC) inventory to its supply. The region has an additional 339 MW under construction.

On the opposite coast, the Pacific Northwest is potentially on track for a record-breaking year, with absorption exceeding mid-year forecasts. Other markets recording significant increases year-over-year include Phoenix, Chicago and Salt Lake City.  

As Covid-19 vaccination rates rise and governments roll back pandemic restrictions, the outlook report highlights that spending on public cloud services will grow by 8.4 percent in 2021 to $4.1 trillion. Technology initiatives and employee management platforms will be key drivers of growth in this space.

Flexible work drives increased investment in technology and data

The shifting landscape of the pandemic is prompting a resurgence in enterprise technology activity. Business leaders and employees alike are eager to resume face-to-face interactions.

At the same time, organizations are adopting robust virtual connectivity applications and leveraging data to enhance health and wellbeing in the workplace.

As enterprises update their workplaces and advance their digital transformations, they are shifting more budget to cloud services and information storage which also translates to greater demand for data centers.

According to JLL Research, while the office will remain the center of the workplace ecosystem, more than half of organizations polled in a recent JLL Pulse survey, plan to make permanent changes to their workplace design. Many are also exploring hybrid models that allow employees to work from home an average of 2.4 days per week. 

A hybrid workplace demands greater data center capacity. Managing flexible facilities requires smart technology such as utilization tracking and occupancy planning software to drive both long-term and real-time space decisions.

Additionally, organizations that shift to unassigned desks need space reservation systems and other technology to support that strategy.

In the hybrid workplace, where employees work every day with others in different locations, shared storage and connection are vital. Demand for videoconferencing services – which became a ubiquitous part of the workday throughout the pandemic – is expected to remain high.

Strategies around flexible workplaces and the return to office are still in flux, but recent trends suggest that shifting IT needs will continue to heighten the demand for data center facilities, even in a post-pandemic environment.

Whatever the workplace of the future looks like, smart technology will undoubtedly be a critical component, as well as the infrastructure to support it.

To explore more trends impacting data center demand, explore JLL’s 2021 H1 Data Center Outlook.