Northern Virginia Update

National Highlights

  • Improving economic conditions,favorable views for recovery and the return of capital availability are driving activity in the data center sector.
  • For both large and small enterprise data center users,demand trends continue to favor operating expense models that call for outsourcing some infrastructure and service components.
  • Supply in the pipeline primarily consists of wholesale space. An increasing number of smaller wholesale suites are becoming available,generating higher levels of commerce and blurring lines differentiating wholesale and retail models with respect to infrastructure.

Spotlight:Northern Virginia

  • Virginia has seen increasing design-build interest from the user community,with a number of operators rumored to . . . →Read More:Northern Virginia Update

Now is the time….

Only after getting past “what is this really going to cost”,can we get down to what do we really need? . . . →Read More:Now is the time….

Data Center Investment

Historical

  • Since 2008,the largest data center leases that have been signed  are technology-related companies such as Google,Yahoo,Microsoft,Apple and Facebook.
  • Facebook has absorbed more wholesale data center space than any other company during the last two years. However,colocation and cloud companies are not far behind.
  • During the last two years,companies have shifted their focus from building their own data centers to leasing from third-party operators.
  • Some of the reasoning behind this is to reallocate capital to core operations,as well as the availability of wholesale space and competency of the operators.
  • According to Gartner,50 percent of data centers that were built . . . →Read More:Data Center Investment

Southeast Region Update

National Highlights

  • Google is reportedly purchasing 111 Eighth Ave. in New York for a 5-percent capitalization rate.
  • Allied Fiber is nearing completion of  its 1,200 mile + dark fiber platform between New York,Chicago and Ashburn. Engineering work on Phase 2 (Ashburn -Knoxville -Chattanooga -Atlanta -Jacksonville -Miami) will commence in early 2011. Allied is completing the designs of several co-builds from both carrier and non-carrier network operators.

Spotlight:Georgia

  • Nearly 500,000 square feet of collocation space will become available through new development and lease expirations.  Atlanta has a total of more than 2.5 MSF of internet data center space.
  • Quality Technology . . . →Read More:Southeast Region Update

New York Market Update

National Highlights

  • PowerLoft sold its 233,000-square-foot building in Manassas,Virginia,for approximately $115 million to Corporate Office Properties Trust. The property was 16 percent leased and continues to support the notion that REITS will provide liquidity for data center developers.
  • Given the number of transactions in the market,we should see a strong fourth quarter of leasing activity on a national basis.

Spotlight:New York

  • The entrance of 111 Eighth Ave. onto the investment sales market could create a shift in the Manhattan data center market.  A new owner may choose to maximize returns by converting existing office space into new data center space as . . . →Read More:New York Market Update

Show me the money! Part I

Over the last couple of months,we have evaluated a couple of wholesale deals that were pretty interesting.  For obvious reasons,we will not share who the clients were or who the prospective landlords were.

Our search was based on 1mW or more and ten year deals.  We looked at the four major costs items;rent,energy &energy efficiency,network connectivity and migration costs.

On one deal,our annual lease cost ranged from $2.9 million to $5.5 million.  We surprised even ourselves on this one.   A $2.6 million spread between high and low.  Taken over ten years this represents a NPV differential of almost $18,000,000.  

It’s easy to guess . . . →Read More:Show me the money! Part I

Northern California

National Highlights

  • Given the limited number of wholesale providers with proven track records,many investors trying to enter the sector  have changed their focus to managed service and hosting companies.
  • There is significant new wholesale  activity in tertiary markets including Charlotte,Indianapolis,Minneapolis,amongst others.

Spotlight:Northern California

  • There has been as much as 175 MW of data center development announced for delivery between now and the end of 2011. It remains to be seen how much will be built after Digital Realty Trust and Vantage Data Centers deliver.
  • The majority of this development is planned in Santa Clara,which is already the densest data . . . →Read More:Northern California

Mid-Year Report

Largest Wholesale Options Available For Immediate Occupancy

  • Orlando
  • Atlanta
  • Phoenix
  • New Jersey

Top Mistakes Made By Companies When Negotiating Data Center Leases

  • Expansion and contraction rights
  • Gross up provisions
  • Operating expenses and other add-ons
  • Security deposit
  • RAMP (i.e.,abatement and installation allowance)
  • Not being aware of lease comparables

States Not Charging Personal Property Taxes On Servers

  • Colorado
  • Illinois
  • Indiana
  • Kansas
  • Nebraska
  • North Dakota
  • Virginia
  • Wisconsin

Largest Wholesale Transactions Completed Year To Date

  • Rackspace  Chicago,IL | 4.3mW
  • Facebook  Ashburn,VA and Northern California | +12mW
  • Boeing  Phoenix,AZ | 6mW
  • Zynga  Santa Clara,CA and Ashburn,VA | . . . →Read More:Mid-Year Report

Dallas (May 2010)

National Highlights

  • There is a shortage of wholesale options in every major U.S. data center market and given the timing of the speculative construction,we anticipate that continuing through the end of the year.
  • There are only 3 wholesale data centers in the U.S. with over 45,000 sf with 6 MW that can offer immediate occupancy.
  • There are 21 properties being marketed in the U.S. as powered shells. Only two properties have had any leasing activity in the U.S. during the last 3 years for a data center reuse. This should change as the aforementioned is leased up over the next twelve months.

Spotlight:Dallas-Fort Worth

Southeast Region (Apr 2010)

National Highlights

  • Phoenix (enterprise users),Northern Virginia (social networking and gamers),and Chicago (hosting) led leasing activity during 1st quarter.
  • There was over 400,000 square feet of wholesale data center leases signed in Q1,2010.
  • FIFA World Cup sends Content Delivery Network companies scrambling for infrastructure and connectivity from Dallas to the world.

Spotlight:Georgia

  • With more than 20% of Fortune 100 companies having a data center presence in Metro Atlanta,the area has long been a destination of choice for enterprise data centers.
  • Wholesale colocation in the Atlanta Metro area is dominated by Quality Technology Services.  With the company’s Suwannee facility full,and the . . . →Read More:Southeast Region (Apr 2010)