Beyond the Hyperscalers: Rise of Tier 2 and Edge Data Centers

With the advent of 5G, the increase of IoT and the pandemic accelerated shift to work from home, the need for Data Centers has increased significantly.  While hyperscalers have accounted for a significant increase (and continued growth) in Data Centers, especially around Tier 1 (T1) cities, there is an opportunity to look beyond the hyperscalers and expand to Tier 2 (T2) markets as well as edge data centers (peering point, colocation, cloud, enterprise data centers, etc.).

According to KPMG’s new “Three Big Opportunities in Data Centers Now” report, the future demand of data centers is in T2 cities and edge data centers where demand is growing faster than the Tier 1 markets. Leveraging proprietary Data and Analytics including:  

  • GIS analysis of fiber routing networks near Tier-1 and Tier-2 cities
  • Comparative analysis data for rental rates data center operators can charge in Tier-1 and Tier-2 cities
  • Demographic analysis of cumulative net absorption trends and forecast data for Tier-1 and Tier-2 cities

KPMG’S Deal Advisory & Strategy can identify key markets across the US where the confluence of infrastructure (cell towers, fiber optic lines, power, etc.) and demand have created a prime opportunity for new T2 data centers and Edge Data Centers.

Additional research from Green Street Advisors demonstrates that data centers faired significantly better during the pandemic induced downturn of commercial real estate values than other categories –data center values rose 7% while most other CRE categories dropped in value:

The paper also addresses the impact of optimization of existing assets (cost reductions, efficiencies, capex analytics) to assess optimal location and operation of Data Centers.

To discuss T2 data centers with authors Phil Wong, Ty Singh, and Saurabh Gupta, please contact Abe Abrams at & 917-453-3373.

Media Contact

Abe Abrams

Abe Abrams

Assoc. Dir., Corporate Communications, KPMG US

+1 201-307-7231



Phil Wong

Phil Wong

Principal, Advisory, Technology Industry Strategy, KPMG US

+1 617-899-8999
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