Once-Impressive 10MW Data Center Pales to the Commonplace 30MW Lease
Some $100 billion was poured into the asset class during the past decade, which has been matched by a technical shift and major influence by cloud platform providers–Amazon, Google and Microsoft.
SAN FRANCISCO—Once a niche investment and inflexible asset for global enterprises, data centers are now a cornerstone of the information economy. In fact, $100 billion was poured into the asset class during the past decade, according to Cushman & Wakefield’s global Data Center Market Comparison.
This significant capital influx has been matched by an equally major technical shift, as enterprises have chosen to move workloads off premises, first to colocation facilities, and more recently to a mixture of colocation/public and private clouds. This shift has caused the largest cloud platform providers–Amazon, Google and Microsoft–to become the most influential players in many markets, altering data center sizing by a factor of 10. The 10-megawatt data center that was impressive 10 years ago now pales in comparison to 30-megawatt leases now signed with increasing regularity.
“The speed with which the industry is shifting makes the creation of a data center strategy a complex and daunting task,” said Dave Fanning, executive managing director and leader of Cushman & Wakefield’s data center advisory group. “Enterprises must determine what to do with their on-premises facility, which workloads to move to the cloud and how implement a hybrid IT strategy. Developers and operators require a parcel with robust fiber and access to power as well as a thorough grasp of the permitting process and all risk factors. Investors must be able to assess the long-term potential of a data center to hold its value and how easily it can be upgraded. All involved require access to capital and a clear understanding of objectives.”
Cushman & Wakefield’s study evaluated 1,162 data centers across 38 global markets, with each data center scored across 12 weighted criteria. In consideration of each market, the highest weight was given to cloud availability, fiber connectivity and market size. Mid-weight considerations were development pipeline, government incentives, market vacancy, political stability and sustainability. Low-weight considerations included environmental risk, land prices, power costs and taxes.
For the top 10 markets–Northern Virginia, Silicon Valley, Dallas, Chicago, New York/New Jersey, Singapore, Amsterdam, Los Angeles, Seattle and London–global leaders maintain supremacy. Still, emerging markets such as Atlanta, Denver, Dublin, Las Vegas, Phoenix, Portland, Salt Lake City, Sydney and Vancouver offer compelling alternatives.
The Silicon Valley data center market ranked number two in the report. As the tech capital of the world, data centers have always been significant to the Silicon Valley ecosystem and demand for capacity remains high. Due to the high cost of land acquisition and construction, a pre-lease is necessary and often available, thanks to the many local enterprises looking for close deployment to ensure the lowest latency for key operations. The area has the densest fiber of any market recorded in Cushman & Wakefield’s analysis, and with absorption the second-highest of any US region in the last few months, vacancy has consistently remained under 10%. Santa Clara remains the local hub for data center development, with all operators preferring to work with Silicon Valley Power, which has prioritized the data center industry.
“It is because of our large share of Fortune 500 companies and the fact we have low-latency access to some of the world’s most important points of interconnection and cloud computing nodes,” Sutton Roley, senior director with Cushman & Wakefield’s San Jose/Silicon Valley office with a specialty in data centers, tells GlobeSt.com. “Silicon Valley Power in Santa Clara is a provider with the most reliable and least expensive power in California. Silicon Valley is poised to experience its strongest data center growth in 2020 with a consistent supply of new capacity coming online.”
Although the study’s top three markets had considerably higher scores than fourth place, the next 12 markets were separated by a final score of less than 10%. This close placement represents a new shift toward key secondary areas fast becoming primary markets around the globe.
Large sites have sold recently in emerging US markets such as Portland, Phoenix and Atlanta, with these areas potentially offering significant savings over locating in California or Northern Virginia.
“The top markets provide the greatest number of options to the greatest number of perspectives,” said Kevin Imboden, director of research for Cushman & Wakefield’s data center advisory group. “While one size sometimes does fit all, for certain specializations, it’s important to review and understand the factors most important to the specific requirement and aim accordingly. Combined with those markets that have been overlooked and underutilized, there is great potential for niche development and secondary markets across the globe.”