2011 Data Center Summary

Issues Most Impacting Data Centers During 2011

  • Reid McConnell Tax Act increased the number of companies spending their own capital to build out space as an alternative to turn-key data center solutions.
  • Due to increased competition,wholesale pricing is flat on a national basis. Downward pressure on pricing is more likely operator specific than market specific.
  • The increased number of developers / operators has provided additional models. Increased flexibility by developers provides tenants greater opportunities to build their desired density. Furthermore,overly dense models (200 watts/sf) will take longer to lease up in certain markets (e.g.,  Chicago,New York).
  • Wholesale speculative construction costs are down . . . →Read More:2011 Data Center Summary

Death and Taxes

It’s April 19,and with tax day fresh in my memory,I’m reminded of the Reid-McConnell Tax Relief Act,which provides for 100 percent bonus depreciation on deduction allowances for investments in new business equipment placed in service between Sept. 8,2010,and Dec. 31,2011.  I’m no tax professional,but I do know this:corporations with data center needs built into their strategic plan for the next few years might want to take a closer look at moving those investments into 2011.  Companies that need to purchase generators,power distribution units(PDUS) ,or even just servers for their data centers could see some significant savings if covered by the . . . →Read More:Death and Taxes

Latency and High Frequency Trading

The data center real estate market has evolved over the last few years as the demand for wholesale data center space continues to increase. Trading firms and other financial institutions have helped drive certain markets. It will be interesting to see how new regulations and/or recent relocation’s by major exchanges impact the trading environment. Click on the following link to read an interesting article:http://www.bbc.co.uk/news/science-environment-12827752

What’s the difference between a colocation facility and a wholesale data center pod?

What’s the difference between a colocation facility and a wholesale data center pod?  It seems that I field that question on a fairly regular basis,and lately,the difference is difficult to explain given how much the lines between them have blurred. 

We used to contrast the two by the size of the transaction or when observing separately dedicated infrastructure.  One was likely to provide an SLA whereas the other was a lease,or the difference could also be the length of the lease term or commitment. 

Increasingly,the larger wholesale operators have stretched to do smaller transactions. It makes sense as there is much more deal flow in the 400-700 KW . . . →Read More:What’s the difference between a colocation facility and a wholesale data center pod?

Taxes and Incentives

In response to budgetary pressures,states are trying to drive additional revenue either by using incentives to attract more data center operations or by collecting more revenue from those they have.

Hot Issues:Sales Tax Collection

  • States are becoming more aggressive in defining the conditions under which online retailers must collect sales tax on internet purchases. Texas and Amazon are currently doing battle over this issue.
  • In response,some larger online retailers are reconsidering their affiliate structures in states like Illinois in order to avoid collection requirements.

Sales Tax Expemption

  • Sales tax exemptions on computer equipment and/or construction costs can be found in many states and represent . . . →Read More:Taxes and Incentives

So just what are Tax Incentives Worth – Georgia?

As everyone knows,tax incentives and low power costs are big drivers for data center site selection.  We have talked about power costs before on our blog (and will likely do so again) but have not spent much time on what tax incentives may be worth.

First most states offer incentives only if you are a real catch (i.e. biggest of the big).  Georgia’s minimum spending qualifier is relative low and as a result Georgia

. . . →Read More:So just what are Tax Incentives Worth – Georgia?

Mardi Gras -The Ultimate 7×24

I spent last week in New Orleans celebrating Mardi Gras.  I am originally from there and so it was a great homecoming.   It was interesting seeing people drift into the hotel at 8:00AM when we were heading out to breakfast  and it made me think about 7×24 operations.

I spoke with one bar owner,who told me that he will clear $150,000 (cash sales) between Thursday AM and Tuesday PM (and his bar was just a little hole in the wall).   May not be much compared to Google’s revenues but its pretty darn good for a small hole in the wall bar.

 When working with clients,I often challenge them . . . →Read More:Mardi Gras -The Ultimate 7×24

Colocation – Concerned over long term fundamentals – Think Again (Part IV)

The game changer is “dark fiber”.   Fiber is nothing more than a means of getting to the internet or is it?

There are a lot of misconceptions about fiber,from you must have two or more fiber providers,to fiber is fiber,to there is an overabundance of fiber,its everywhere!

What is the internet anyway?  First it’s a business that is very similar to TV.  Same product.  You may think that the product of TV is entertainment and news.  Wrong.  It’s the audience and the clients are the advertisers.  Today,television averages only 15 to 20 minutes of real content per hour and is dominated by realty shows,contests . . . →Read More:Colocation – Concerned over long term fundamentals – Think Again (Part IV)

Colocation – Concerned over long term fundamentals – Think Again (Part III)

Containers are a GREAT concept but they are a very poor substitute for real estate.  Let me explain.

Suppose that I could issue an RFP and have a

. . . →Read More:Colocation – Concerned over long term fundamentals – Think Again (Part III)

The Future of Wholesale Data Centers

If you read our market reports,you may have read that some of the largest and most active customers of Wholesale Data Center space are large technology companies like Microsoft,Facebook,Yahoo! and Google.

With that in mind,you may have found today’s Wall Street Journal article regarding Facebook’s Prineville Oregon data center interesting.  The article is entitled:“Facebook Data Center is Boon for Oregon Town.”

Rendering of Facebook's Prineville Data Center

The article describes Facebook’s ambition to build yet a second data center in Prineville,just like the first 300,000 sf facility (the first phase of which is not even open yet!).  You may . . . →Read More:The Future of Wholesale Data Centers