Raul Saavedra, EVP of JLL in San Francisco.

Part 3 of 3

SAN FRANCISCO—In part one of this three-part exclusive Q&A, we chatted with sources across the West Coast about what industries were driving data center activity. In addition to tech, sources said that there is increasing interest among Asian corporations looking to enter the market or expand their current presence. In part two, we asked those same executives to describe the supply/demand dynamic in their market. And in the final part of the series, we talked JLL executives about what is in store for the future of data center space.

For the San Francisco region, “we will see only 200,000SF/18MW of new data center space delivered next year—most of it pre-leased wholesale space in Santa Clara,” explains Raul Saavedra, EVP of JLL in San Francisco. Beyond that, he tells GlobeSt.com, the pipeline for new construction in the region is less than 380,000SF/43 MW and developable sites are rapidly disappearing.

“Look for available inventory in the wholesale data center market to become tight through next year and although pricing will remain relatively stable in the short term, rental rates will trend upward later this year and into 2017,” he says.

Down in Los Angeles, Darren Eades, EVP, says that the data center space has a large and diversified corporate makeup. “While we don't have a crystal ball we do strongly believe that the market will continue to grow as the city grows, as new applications hit the market, as companies continue to desire access overseas and as supply becomes constrained in other markets.”

Up in Seattle, Conan Lee, managing director, says that there will certainly be more new supply, especially in central Washington and Hillsboro, Oregon over the next 24 months. “This will alleviate some of the ongoing data center demand.”

Seattle and Hillsboro, Lee continues, are becoming major telecommunications routing hubs and we expect to see more telco transactions in both of those markets next year. “Both users and data center providers seem to want to expand in the Pacific Northwest so we anticipate a good balance between supply and demand for the foreseeable future.”

The Denver and Colorado Springs area will remain highly sought-after markets for providers and users alike during the near-term time horizon, associate Mark Stratman Jr. explains. “Providers will continue to find strong demand through retail colocation and the benefits reaped by being centrally located. Users will benefit from low and stable pricing, expansion flexibility and a wide array of managed service options.”

Colorado Springs, in particular, he adds, will still serve as an attractive option for enterprise data center options owing to its proximity to Denver, as well as local colleges and military installations (talent and local resources).

Mark Bauer, managing director, says that demand is rapidly attracting players to Phoenix. “By year's end, entities like QTS, DuPont Fabros, Cloud HQ and T5 Data Centers could each announce new projects. Buildings with flexible designs and varied electrical schemes are popular among users, particularly those trying not to over commit in the face of rapidly advancing cloud technology. With local and incoming demand for the anticipated growth, there is little concern about overbuilding.”

Part 3 of 3

Instant Insights /

What Does the Future Hold for Data Center Space?

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