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Toronto DCI Report 2022: Data Centre Colocation, Hyperscale Cloud & Interconnection

December 15, 2022

Toronto continues forward on its path as the largest data centre market in Canada and hyperscale remains the driving force. The Toronto data centre market is projected to generate USD $388m in 2022 and grow at a five-year CAGR of 18.3%. Absorption levels continue to climb in both the retail and hyperscale categories even as inventory is consistently being built out and expanded. 

Hyperscale is now the driving force behind the market and this is still a relatively recent development. Montréal is where public clouds first landed in Canada – drawn to the more attractive economics of building in the province of Québec. But this was never going to be sustainable over the long-term. Cost is important, but so is proximity and performance. It was a matter of time before end user requirements would necessitate localized cloud infrastructure in Toronto. 

The growth potential of hyperscale is what has shaped the competitive landscape. The market is now controlled mostly by US-based operators armed with established hyperscale and enterprise relationships, a strong currency and a lower cost of capital. And they are taking full advantage.

Hyperscale has also been a catalyst behind the growth on the retail colocation side of the market. Demand for colocation is steady, but even healthier when it comes to services with an interconnection capability. Organizations are not all moving to cloud, but they are nearly all trying to connect or integrate with cloud in some shape or form.

The current phase of growth has been smooth, but there could be bumps in the road ahead. To this point, hyperscale customers have leased colocation exclusively in this market, but there are signs that Microsoft could soon be self-building. Given that it is the biggest consumer of colocation in the market, this could significantly alter the market’s demand profile. Another long-term question that will shape the market revolves around what AWS will do. It is going with Local Zones for now, consuming some colocation to get its Toronto footprint up and running. WIll demand for Local Zones create more colocation demand? Or will AWS eventually decide to build a third full cloud region in Canada and when it does, will it self-build, use colocation or both? The answers to these questions will tell us a lot about the market’s future. 

This report is an excellent resource for any service provider, investor or enterprise end user looking to understand and project the data centre market inToronto or find a service provider. The methodology applied continues to be the most robust in the industry. We track supply on a space and power basis, split all the metrics along retail and hyperscale lines, and aggregate inventory in multiple tiers according to build status, absorption rates and maximum capacity levels. Hyperscale cloud nodes and on-ramps are mapped and a complete directory is provided. 

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