Google, Amazon and Microsoft are spending big money to buy data centers for their exploding cloud businesses.
Google, Amazon and Microsoft cloud businesses helped more than double spending on data centers last year
2018 could be a record, too.
Rani Molla was a senior correspondent at Vox and has been focusing her reporting on the future of work. She has covered business and technology for more than a decade — often in charts — including at Bloomberg and the Wall Street Journal.
Cloud companies and data center providers altogether spent a record $20 billion in 2017 buying properties known as data centers that house computer servers. That’s more than the three previous years combined, according to a new report by real estate company CBRE.
These data centers power the mobile phones, websites and driverless cars that are becoming more important to everyday commerce and tech development.
Microsoft’s, Google’s and Amazon’s rapidly growing cloud businesses have contributed to the jump in data center investment. Barely three months into the year, more than $4 billion has already been spent on data centers in North America, according to CBRE. That puts 2018 on track for more than $20 billion.
The investments mark a swapping of data centers. Google, Amazon, Microsoft and others are buying up centers that once belonged to Fortune 500 companies for whom it no longer makes sense to maintain their own data infrastructure, thanks to cheaper data center providers and cloud services from companies like Google and Amazon and Microsoft. The cloud has also become essential to Silicon Valley startups, many of which build entire apps and services off the cloud services from the major companies.
“You’ve got a major transition happening with the ownership of data center assets,” according to Pat Lynch, senior managing director for CBRE’s Data Center Solutions. “Three to five years ago, the vast majority of the data center space utilized around the world was occupied by the company that owned or leased that space.”
Starting last year, big cloud companies began buying those companies’ assets aggressively — sometimes for more than they’re worth — contributing to the inflated data center investments.
The trade seems to be that cloud providers will pay more for the real estate assets in order to get those companies to sign up for — and pay for — their cloud offerings.
“This could be a play to get enterprise in with them for the long term,” Lynch said. Otherwise, he said, “The real estate fundamentals don’t add up.”
This article originally appeared on Recode.net.
