Data Centers Are Hot Ticket in the World of Big Data

The data business is booming. Just look at the growth in cloud computing, big data, e-commerce, and digital entertainment.

Given the growing demand for data hosting and processing services, it is no surprise that there has been huge growth in data centers and third party multi-tenant data center (MTDC) providers in recent years. For example, MTDC’s in the U.S. alone saw revenues increase by 6.1% last year to $115.3 billion, according to JLL. Both 2014 and 2015 were very strong years in terms of data center leasing activity, too.

At the end of 2015, there were 195.1 megawatts (MW) of inventory available at U.S. properties with another 134.4 MW under construction, according to the North American Data Centers January 2016 Report. This number is expected to rise in the coming years as major telecom  companies divest their data center space, pursue sale-leaseback strategies, and accelerate new construction.

Finding the right location

Deciding where to locate critical data center functions is no easy task, especially since there is no “one-size-fits-all solution” when it comes to selecting suitable data center locations, reported CBRE.

Some of the determining factors are capacity, purpose, and redundancy requirements related to disaster recovery planning. One of the largest considerations is energy costs, followed closely by construction costs, especially considering that IT infrastructure can be up to three times as expensive to build. According to CBRE, the most affordable markets for enterprise data centers include (in alphabetical order):

  • Atlanta
  • Charlotte
  • Cheyenne, Wyo.
  • Colorado Springs
  • Des Moines
  • Omaha
  • Portland
  • Quincy, Wash.
  • Salt Lake City
  • Tulsa, OK. 

Some regions are working harder to attract data centers with economic development incentives. For example, Texas recently passed tax incentive legislation that provides a “100 percent sales tax exemption on business personal property necessary for data center operations for large users,” according to JLL. In fact, these incentives may have been a factor in Facebook’s decision to invest $500 million in a 750,000-square-foot complex under construction in North Ft. Worth. States and municipalities are incentivized to attract data center facilities because they typically generally significant sales and property taxes.

Being close to the demand (or not)

Some MTDC providers aim to locate close to their customer base, and in that regard, there are some notable markets that are home to a large concentration of data facilities. Northern Virginia is considered one of the data center hotspots due to demand from content providers, the federal government and government contractors in DC. Northern Virginia reported 63.0MW of absorption in 2015, according to JLL.

Other hotspots for demand in North America include Northern New Jersey, Greater Chicago, and Toronto — all havens for cheap suburban land that is in close proximity to data-rich markets. Some data centers are opting to move offshore where costs are cheaper. In a recent report, JLL predicted that data center investment in Latin America will grow by nearly 20 percent between 2015 and 2018.

According to a recent Forbes article, Microsoft Research is testing a new low-cost data center that is located, literally, offshore. Project Natick is an experimental data center that sits on the ocean floor in a 38,000-pound chamber and has enough space for about 300 PCs. Although it sounds way more complicated, it is actually purportedly easier to build these capsules and they have the potential to significantly reduce energy (it’s a lot easier to cool) and real estate costs.

Whether it succeeds or fails, Project Natick is a great example of how the data center industry is evolving as companies continue to push the envelope to come up with creative and cost-effective solutions. 

Billy Fink
Billy Fink
Billy Fink is a former member of the VTS team.
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