As the discussion of data center investment and development continues, a new player is emerging. Welcome to the world of the neocloud. Neoclouds go beyond your standard internet cloud storage by providing on-demand access to graphic processing units (GPUs). This, in turn, offers more power and cooling to bandwidth-hungry artificial intelligence, blockchain and gaming activities.
According to JLL’s write-up, “The Rise of Neocloud in the AI Landscape,” those involved with data center real estate need to pay attention to this newer entry in the ever-changing technology area. “Neoclouds thrive as alternatives to hyperscalers by offering superior flexibility, scalability, and cost advantages for specialized AI infrastructure needs,” the report said.
JLL analysts pointed out that neocloud growth is the result of growing AI demand for GPUs, which require extreme power (100 kW per rack or above) and advanced cooling systems beyond the capacity of current data facilities. Furthermore, neoclouds offer advantages over hyperscalers, including rapid deployment of GPU infrastructure and cost savings. Furthermore, neoclouds can work in partnership with hyperscalers; the former specializes in AI workloads, while the latter provides other services.
When it comes to data centers, neoclouds can help generate new revenue opportunities through waste heat monetization partnerships; neocloud facilities generate a great deal of heat. They can also help boost rental rates versus the usual enterprise tenants, as there is limited space and inventory for this particular technology.
But before you decide to plunge into the neocloud infrastructure market, keep the following in mind:
The investment risks are higher, as are capital requirements. The field is fairly new, meaning revenue uncertainty and specialized infrastructure costs. Additionally, building the GPU infrastructure requires substantial investment.
The lease terms are shorter. While traditional data center leases can run for 15 years, “neocloud GPU contracts typically last two to five years, creating a critical mismatch with asset payback periods of seven to nine years,” according to the report.
JLL analysts suggest that those interested in neocloud investments perform in-depth assessments on tenants, while focusing on “power-abundant GPU infrastructure with property due diligence.”
The post Neocloud: The Next Phase in AI, What it Means for CRE appeared first on Connect CRE.
#Neocloud #Phase #Means #CRE