By Kruti Desai, National Research Insights Manager | April 30, 2020

A cooler climate gives Canada a great advantage when it comes to data centre locations. The average data centre can be expensive to operate due to its extensive energy requirements, resulting in exuberant power and cooling costs. Cooler Canadian temperatures for the better part of the year helps to reduce these costs by using very geographic-specific, energy-efficient cooling technologies. These cooling strategies use outside air to cool equipment, rather than installing expensive, power-consuming chillers or compressors. The lower costs of energy, high bandwidth availability, growth in the tech sector, and the access to a sufficient labour force of over 15 million tech workers and the expansion of tech companies, makes Canada a very competitive landscape for this asset class.

As companies have had to transition their employees to work from home due to the COVID-19 pandemic, their technological capabilities have been tested and, for some, their overall digital infrastructure has been put into question. The impact of COVID-19 has resulted in drastic changes in data centre traffic as the workforce rapidly moves towards a digital economy.  Data centres have been in strong demand as a result of the rapid growth in cloud services, especially with the growth in the data and knowledge sectors and the number of companies that are outsourcing. Data centres are also being used by various industries, from grocery fulfilment to retailers and banks. The number of data centres is also going up for cloud service providers and will likely see an increase in the foreseeable future. However, many individual organizations maintaining their own data centres may in fact migrate their operations exclusively to cloud services to reduce the capital costs of maintaining data centres. Cloud providers are also attempting to meet the needs of higher compliance standards by offering more secured services. Insurance, financial services and healthcare companies, however, are still maintaining most of their own data centres to meet regulatory requirements, given the highly sensitive and confidential nature of their data, particularly healthcare data.

According to, there are an estimated 404 data companies representing over 260 data centres across Canada, with over 28 data providers and 87 locations in the Greater Toronto Area (GTA) alone. Demand for adequate space for data centres will likely remain high, and the types of spaces occupied for this use may range from traditional office space to former newspaper printing presses and industrial flex space. It is the larger data centres that typically take up entire industrial buildings spaces to meet operational and capacity requirements. Data centres with higher quality office finishes may also have higher rents than traditional industrial warehouses.  From an investment perspective, based on expected continued demand, data centres are still highly sought after because they offer an alternative investment product and stable returns.  Since 2016, there has been over $500 million in data centre transaction activity in the GTA.  Despite comprising only a small percentage of overall investment activity, these facilities offer high, stable returns and have seen rental rates increase rapidly over the past several years. We anticipate that in addition to the growth of e-commerce, data centres will also contribute to the growing demand for industrial space.



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