SAN DIEGO—San Diego has been a retail colocation market for data centers for some time, with the local operators focusing on smaller requirements with an emphasis on managed services and cloud solutions, CBRE first VP Kristina Metzger tells GlobeSt.com. According to a recent report from the firm, high power costs, elevated tax rates, a lack of incentives and high natural disaster risk are all contributing to the out-of-state migration of large data center users and the increasing focus on smaller, retail colocations in Southern California.
Metzger explains to GlobeSt.com, “Data centers are measured in units of power, not square feet, like traditional real estate. A typical data center lease in a retail or wholesale colocation is typically based on a dollar per unit of power per month, most commonly a kilowatt. One thousand kilowatts makes 1 megawatt, which is the unit most commonly used to track data center absorption.
The report revealed that with just 2.6 megawatts of absorption in 2016, the overall vacancy rate for existing wholesale data-center space in Southern California dropped to 18% in 2016 from 21.1% a year ago. In contrast, net occupancy gains are as high as 84.4 megawatts and vacancy rates below 5% across other major US data-center markets. In Southern California, most data-center requirements average fewer than 300 kilowatts.
With San Diego being an ideal market for smaller spaces, we spoke with Metzger, who is Southern California market leader of CBRE's Data Center Solutions group, about how this trend toward smaller retail colocation spaces for data centers is affecting San Diego and the Southern California market as a whole.
GlobeSt.com: How will the increasing focus on smaller, retail colocations for data centers in Southern California impact how space is used in San Diego?
Metzger: San Diego has been a retail colocation market for some time, with the local operators focusing on smaller requirements with an emphasis on managed services and cloud solutions. The market shift will occur in the greater Los Angeles area, where there is an existing wholesale operator community.
GlobeSt.com: Do you see this as a permanent trend, or will the large users return to Southern California at some point?
Metzger: While I will never say never, all signs point to a permanent shift. It does not appear, unless market dynamics like electricity cost or taxes change, that large users will select Southern California for their data center locations unless absolutely necessary for operations.
GlobeSt.com: What are the advantages to large users in leaving this market?
Metzger: The financial savings can be significant. Many adjacent markets are half the cost of Southern California, from an electricity and tax perspective. In addition, being located more centrally can provide operational benefits.
GlobeSt.com: What else should our readers know about this topic?
Metzger: Data centers are not going away. As companies move to either wholesale colocation or fully outsourced cloud solutions, they simply are shifting loads from existing sites to others and accessing them remotely. Demand is higher than it has ever been. Every time you access an app on your iPhone or use Gmail, you are utilizing cloud computing.
SAN DIEGO—San Diego has been a retail colocation market for data centers for some time, with the local operators focusing on smaller requirements with an emphasis on managed services and cloud solutions, CBRE first VP Kristina Metzger tells GlobeSt.com. According to a recent report from the firm, high power costs, elevated tax rates, a lack of incentives and high natural disaster risk are all contributing to the out-of-state migration of large data center users and the increasing focus on smaller, retail colocations in Southern California.
Metzger explains to GlobeSt.com, “Data centers are measured in units of power, not square feet, like traditional real estate. A typical data center lease in a retail or wholesale colocation is typically based on a dollar per unit of power per month, most commonly a kilowatt. One thousand kilowatts makes 1 megawatt, which is the unit most commonly used to track data center absorption.
The report revealed that with just 2.6 megawatts of absorption in 2016, the overall vacancy rate for existing wholesale data-center space in Southern California dropped to 18% in 2016 from 21.1% a year ago. In contrast, net occupancy gains are as high as 84.4 megawatts and vacancy rates below 5% across other major US data-center markets. In Southern California, most data-center requirements average fewer than 300 kilowatts.
With San Diego being an ideal market for smaller spaces, we spoke with Metzger, who is Southern California market leader of CBRE's Data Center Solutions group, about how this trend toward smaller retail colocation spaces for data centers is affecting San Diego and the Southern California market as a whole.
GlobeSt.com: How will the increasing focus on smaller, retail colocations for data centers in Southern California impact how space is used in San Diego?
Metzger: San Diego has been a retail colocation market for some time, with the local operators focusing on smaller requirements with an emphasis on managed services and cloud solutions. The market shift will occur in the greater Los Angeles area, where there is an existing wholesale operator community.
GlobeSt.com: Do you see this as a permanent trend, or will the large users return to Southern California at some point?
Metzger: While I will never say never, all signs point to a permanent shift. It does not appear, unless market dynamics like electricity cost or taxes change, that large users will select Southern California for their data center locations unless absolutely necessary for operations.
GlobeSt.com: What are the advantages to large users in leaving this market?
Metzger: The financial savings can be significant. Many adjacent markets are half the cost of Southern California, from an electricity and tax perspective. In addition, being located more centrally can provide operational benefits.
GlobeSt.com: What else should our readers know about this topic?
Metzger: Data centers are not going away. As companies move to either wholesale colocation or fully outsourced cloud solutions, they simply are shifting loads from existing sites to others and accessing them remotely. Demand is higher than it has ever been. Every time you access an app on your iPhone or use Gmail, you are utilizing cloud computing.
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