Market Trends of Middle East Data Center Construction Industry
Tier 3 Expected to Hold the Major Share in the Region
- The tier 3 segment of the data center market in the Middle East is expected to record a CAGR of 21.48% during the forecast period (2024-2030) due to the growing user base of streaming services, online gaming, smart home automation services, and other factors.
- There are around 90 tier 3 data center facilities in the Middle East. These facilities are mainly located in Dubai, Abu Dhabi, Jeddah, Fursan, Riyadh, Herzliya, Rosh HaAyin, Tel Aviv, Bnei Zion, Doha, Tehran, Amman, Aqaba, Al-Askar, Hamala, Muscat, and Bawshar.
- In 2023, the tier 3 segment dominated the market, claiming a substantial 75% share, boasting an IT load capacity exceeding 600 MW. Geographically, the United Arab Emirates led the pack with a 36% share, trailed by Saudi Arabia at 28.6% and Israel at 25.4%, with other countries following suit.
- In terms of the number of facilities, medium data centers in the tier 3 segment in the Middle East currently have a market share of 44.7%, followed by market shares of 34%, 16%, and 3.2% for large, small, and mega data centers, respectively.
- Such instances in the Middle East are expected to drive the demand for tier 3-certified facilities. This surge in demand, specifically from the tier 3 segment, is anticipated to bolster the need for data center construction services in the years ahead.
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Saudi Arabia Expected to Hold Major Share in the Region
- The Saudi Arabian data center market held the major share in 2023, with an IT load capacity of 258 MW. Saudi Arabia's data center infrastructure development has surged, propelled by the government's 'Vision 2030' initiative, designed to broaden the nation's economic base.
- Positioned at the crossroads of Asia, Africa, and Europe, Saudi Arabia leveraged its strategic location to bolster its data center market. The Red Sea and Arabian Gulf witness a significant influx of subsea cables, further enhancing the region's connectivity. The data center industry, emerging in the early 2000s, primarily catered to the telecoms and banking & finance sectors. Over the years, a surge in both local and international investments has catalyzed the sector's growth, prompting the development of tier-3 and tier-4 certified data centers.
- The rising adoption of the Internet of Things (IoT) for higher production efficiency, better customer experience, improved communication services, and Industry 4.0, in line with the country’s Vision 2030, is driving the ICT market’s growth. The joint venture specializing in IoT by the vendors in the country is further creating demand for IoT solutions and infrastructure. In March 2022, Saudi Telecom Company (STC) formed a USD 131 million partnership with the Public Investment Fund (PIF) to establish a new joint venture (JV) specializing in IoT to expand its 5G and NarrowBand-IoT connection infrastructure.
- The ongoing smart city projects, including NEOM, Red Sea, Qiddiya, Waad Alshamal, and SPARK, and initiatives to develop the most connected and digitized nation by 2030 are the factors further fueling the adoption of IoT technology. This growing adoption of IoT is expected to provide opportunities for the ICT vendors to develop and cater IoT solutions for applications such as predictive maintenance, asset tracking, fleet management, and warehouse optimization.
- In August 2023, Saudi Arabia announced that it would host the Seamless Saudi Arabia 2023 Conference, steered by the Saudi Central Bank. The conference's theme was "The Future of Payments, Fintech and Banking across Saudi Arabia," and the meeting cemented the apex bank's efforts to achieve the Saudi Vision 2030 objective of digital transformation within the financial sector. The surge in data storage demand is poised to elevate the need for data centers in the region, thereby bolstering the prospects of data center construction firms in the coming years.
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