GLOBAL KNOWLEDGE CENTER
U.S. DATA CENTER REPORT H1 2019 AUGUST 2, 2019
Introduction Newmark Knight Frank’s first half (H1) 2019 Data Centers Report is driven by trends from Datacenter Hawk and 451 Research, as well as from research undertaken by NKF’s Global Knowledge Center. Moving from 2018 to 2019, there are several trends affecting the data center market. Data center operators will need to plan for environmental changes such as warmer temperatures outside, changes in water availability and regulatory requirements for power sources and natural disaster risks. Data center vendors and providers are becoming more flexible and adopting to new technologies, however more change from growth in Internet of Things (IoT) and 5G will be required. There are also changes related to the infrastructure and efficiency of data centers. With the increased dependency on technology, data centers are expected to function as efficiently as possible 24/7. To match this high demand, data analytics, cloud, prefabrication, multi-site resiliency and open source architectures are being applied to data centers to create intelligent, connected and purpose-built critical infastructure that responds to these changes. Invisible infrastructure is also becoming increasingly important for data centers. Providers and vendors are looking for infrastructure that is instantly available, operating and scaling regardless of specific requirements, and billed and metered in a flexible manner. Customers increasingly expect “cloud-like” consumption options for all their infrastructure needs, and providers that can offer automation, scalability and flexibility, as well as customization will stand out in the short-term and will be the most successful in the long-term. Source: 451 Research 2019
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Growth of MTDC Markets Multi-tenant Data centers (MTDCs) remained a solid industry during 2018 and are expected to grow in 2019. 451 Research forecasts the compound annual growth rate (CAGR) for global MTDC revenue at 9.3% for the period from 2017-2022. Despite this progress, the global MTDC market remains highly fragmented, with roughly 1,200 companies offering MTDC services, providing opportunities for further consolidation. 451 Research has identified 111 “top-tier” global MTDC revenue of at least $30 million. While we have seen some consolidation in the market, smaller providers continue to expand, resulting in more providers falling into this category than in previous years. Mergers and Acquisitions (M&A) activity has also led to upward movement within revenue buckets for some providers. Source: 451 Research 2019
Major Trends in Data centers 2019 Trend 1: Providers will accommodate or cooperate with the cloud A recent survey from 451 Research found that 38% of colocation providers were just as likely to see themselves competing with hyperscale cloud firms as partnering with them. However, products and services by data center providers are different from those that hyperscale cloud players offer. Data center firms should focus on how to accommodate cloud providers – either through scale and interconnection options – or cooperate with themby offering hybrid products and migration services. Recommendations: 1. Understand your customers’ requirements and focus your business model accordingly. 2. Choose your partners well. 3. Where possible, service providers should formalize relationships with key technology vendors and integrators to keep up to speed with new products and trends.
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Trend 2: IoT and 5G will change the way we think about the Edge The roll-out of 5G and growth of IoT devices are expected to drive demand for vast amounts of data storage and processing capacity. The question is where this capacity will need to be and who will own it. The answer could be disruptive to the current centralized data centers approach, but also present opportunities – particularly in offering private cloud to specific verticals such as healthcare and government. Recommendations: 1. Remember that providing edge-ready data centers is not as simple as building a smaller site in a smaller location. 2. Providers seeking to go down this route must invest in R&D and understand how customers will want to connect. 3. Providers building edge data centers will also need to carefully think about product delivery and pricing models.
Trend 3: Data centers will be increasingly industrialized, AI-assisted and re-distributed MTDC providers alike are forced to make growing use of factor prefabrication of subsystems to streamline construction, improve efficiency, prevent outages and lower maintenance costs. This trend will likely become a must-have as machine and deep learning models begin to extract more value from telemetric data. As the size and complexity of infrastucture grows, the ability to analyze data not only from facilities but also from IT infrastructure and applications will become a muchneeded feature of advanced data center infrastructure management (DCIM) software. Uptime reports outages have actually increased recently: 31% of respondents to its survey say they have suffered failures that impacted their IT service. This may be due to the increased complexity of data centers and the interdependencies of different systems and different facilities. Recommendations: 1. Take time to reconsider planning, design and build procedures. 2. Have a DMaaS strategy – the key components of value for DMaaS will be a combination of DCIM software, cloud delivery, big-data analytics and on-premises field services. Most suppliers will be able to provide just one or two of these capabilities and will need strong partners elsewhere. In addition, the suppliers with the most data will dominate. 3. Software providers should develop more tools for hybrid infrastructures.
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Trend 4: Rising chip power will force rack density higher, boosting interest in liquid cooling As all major chip suppliers push to produce higher-power chips to attain more performance and overall system proficiency, air cooling appears to be more inadequate by the day. Some forward-thinking operators are looking beyond air-cooled Data center designs to improve infrastructure economics. Direct liquid cooling (DLC) will likely make its way into non-HPC data centers – gradually at first, then spreading rapidly. First movers will likely gain over cost and performance advantages. Recommendations: 1. Explore DLC options now. There are various forms of DLC systems on offer from a growing number of suppliers, each of which will offer different characteristics. These are not just server makers and established data center vendors on the market, but DLC specialists as well 2. Create a technology roadmap. The shift for most will not happen immediately in a wholesale fashion. the ability to install various DLC cabinets in a predominantly air-cooled Data center will be a key requirement to meet tenant needs.
Trend 5: Climate change and sustainability will become hot issues Scrutiny of data center operators’ environmental footprint and their social responsibilities will only grow with their resource consumption. Customers of MTDCs will also want to ensure their providers meet environmental standards and work actively to reduce their carbon and water footprints. At the same time, high summer temperatures and water scarcity in some locations mean that questions around long-term operational sustainaiblity may arise more frequently. For policy reasons, PR and commercial risk management, operators need to plan for and actively manage their response to changes in the environment. Recommendations: 1. Operators should prepare an internal environmental report if they have not already done so. Examining everything from efficiency to power source to water use/source for each data center and summarizing how facilities are efficient and renewable, or not, will help prepare you for customers and officials that increasingly ask those questions. It can also lead to improvements. 2. Re-examine data center disaster plans. Disaster planning must include worst-case scenarios for the data center, but also for staff and families. Firms should prepare for broader geographic disruptions beyond those at the immediate data center location, and a wider range of potential disasters at or near the data center.
Source: 451 Research 2019 NEWMARK KNIGHT FRANK
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Atlanta Data center operators are optimistic about Atlanta’s ongoing transformation. New supply will drive future demand and enable Atlanta to develop into a major data hub for the Southeast. Atlanta proves to be popular once again for its attractive location, reasonable costs and competitive colocation market.
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Structure of a staircase in Midtown Atlanta, GA.
Energy In 2017, Atlanta became one of several American cities to commit to a transition to 100% renewable energy by 2035. As of March 2019, Atlanta reinforced its commitment when the Mayor’s office released a more detailed plan to help Atlanta achieve that goal. The plan includes the following action items, among other things: “Working to adopt stronger building codes for efficiency and solar, expanding education programs for residents, expanding electric vehicle (EV) charging infrastructure throughout the city and establishing workforce training, including collaboration with technical colleges and trades, to develop a clean energy workforce”.
Incentives Data centers near the Atlanta Belt Line that had been previously denied permission to expand, has since been granted that permission. The legislation restricted industrial activity to 500 feet from the BeltLine corridor, and it was feared that a presence of a data center would negatively impact the visual experience of the Belt Line. The applicant for the extension is looking to reduce the number of parking spaces required by the city from 1,630 spaces to 40. Atlanta categorizes Data Centers as office buildings and hence the required number of parking spaces is calculated with a parking formula. The state of Georgia passed tax incentives for data center development to encourage data center investment by reducing tax on IT equipment purchased for Data center use. Despite the high threshhold to qualify, this is seen as an encouraging sign to large IT infrastructure users and data center operators in Atlanta about the future growth.
Atlanta: Absorption (in MW) 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0
Q3 '18 Q4 '18
Q1 '19
Q2 '19
-0.2 -0.4
Source: Datacenter Hawk Q2 2019
Atlanta: Market Vacancy (Available Power/Commissioned Power) 12.4% 12.2% 12.0% 11.8% 11.6% 11.4% Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
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Atlanta: Market Summary (by MW) Available Power
Commissioned Power
Planned Power
Under Construction Power
400 300
170
200
170
257
253
254 183
174
171
170
100 0
21
20
9 Q3 '18
8
20
Q4 '18
7 Q1 '19
21
6 Q2 '19
Source: Datacenter Hawk Q2 2019
Available Space (SF) 173,199
Commissioned Space (SF) 1,826,455
Under Construction Space (SF) 65,000
Planned Space (SF) 1,883,386
Source: Datacenter Hawk Q2 2019
Development News
Outlook
In Q1 2019, DataBank delivered their first 94,000 SF data center in Atlanta (ATL1) as part of their agreement with Georgia Tech. the college will utilize part of this data center space to connect to research and educational institutions in the area.
The next two years will be a growth period for Atlanta. Atlanta’s multi-tenant market is currently at 170 MW of comissioned power. An additional 250 MW allocated for future projects will not only bring more investment into the area but also will drive demand.
Flexential recently expanded the construction of the first 3 MW of their 6 MW expansion in their Atlanta 3 data center. This development is driven by a growth in construction activity from the data center operator community as well as by an increased demand from Atlanta-based companies.
Sources Datacenter Hawk 2019, Saporta Report, NA Windpower
Transactions T5 purchased an 85-acre site in Douglas County, emphasizing its continued growth in the Atlanta region. T5 sold two properties they previously operated — a 7 MW data center in Alpharetta and a 38-acre parcel in Lithia Springs. Both were purchased by the same buyer, IP Partners, in 2019. American Tower, one of North America’s largest owners of cellular and wireless infrastructure, entered the data center industry with their purchase of Colo Atl. Colocation provider Colo Atl operates their colocation space inside Atlanta’s downtown carrier hotel, 55 Marietta St.
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Chicago Demand in the Chicago market was relatively slow in the first months of 2019. The Chicago data center market is historically attractive to both hyperscale and enterprise data center users, with the latter user sector (between 100 kW - 1 MW) the most active in the market over the last few quarters.
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Chicago River.
Energy Chicago City Council is getting ready to renegotiate its franchise agreement with the main energy provider Commonwealth Edison. The current agreement is set to expire in 2020. The renewal may bring about the risk of higher energy prices for businesses in the coming year, but it will also improve the reliability of the electric grid and environmental impact of electricity. City officials will be pushing ComEd to align with clean-energy objectives.
Incentives Illinois lawmakers plan to offer tax incentives to boost data center investment in Chicago. The city would like to attract large enterprises and tech firms to set up their data centers in Chicago. As part of a $45 billion capital construction plan, the new bill would “exempt qualifying Data centers from state and local tax on equipment inside the facilities� such as cooling equipment, racks and servers, for ten years. New development in lowincome areas will also receive a 20% income tax break. An investment of $250 million is required to qualify according to the incentive, coupled with a requirement to hire at least 20 high-paid full-time employees over five years. Moreover, the buildings must meet the green building standards. The bill is waiting to be signed off.
Chicago: Absorption (in MW) 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
Chicago: Market Vacancy (Available Power/Commissioned Power) 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Q3 '18
Q4 '18
Q1 '19
Q2 '19
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Chicago: Market Summary (by MW) Available Power
Commissioned Power
Planned Power
Under Construction Power
500 400
306
300
323
308
325
170
200 100
408
385
371
356
41
37
9
0 Q3 '18
12
48
Q4 '18
5 Q1 '19
45
9 Q2 '19
Source: Datacenter Hawk Q2 2019
Available Space (SF) 321,870
Commissioned Space (SF) 1,826,455
Under Construction Space (SF) 65,000
Planned Space (SF) 2,388,454
Source: Datacenter Hawk Q2 2019
Development News A San Francisco-based data center operator Digital Realty is currently under construction with a shell building for 9401 W Grand Avenue, which will hold up to 40 MW of commissioned power in four data halls when completed. The operator purchased the site in 2016. CoreSite recently jump-started construction of a new Chicago data center, CH2, with plans to deliver a total of 18 MW of commissioned power at the facility, split between three 6-MW phases. The new facility will be a four-story data center, less than a mile away from their existing Chicago location. STACK Infrastructure, a data center company, announced plans to build a second data center in the Chicago market. A multi-story data center facility will deliver 20 MW of commission power upon completion. This development will bring STACK’s total capacity in the city to at least 33 MW.
Transactions In January 2019, Element Critical purchased two data centers operated by Sungard for $19 million, adding the Chicago market to their portfolio. The two facilities are located in Wood Dale, IL and together can offer as much as 15 MW and 111,000 SF of commissioned power and space. The provider of data center and IT infrastructure services plans to invest another $40 million in improvements.
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Also in Q1, New Continuum purchased a facility in North Chicago that they previously leased from CenterPoint Properties. In Q2 2019, Lincoln Rackhouse, a data center division of Lincoln Property Company, bought a data center provider ByteGrid, which has an existing presence in Chicago, Seattle, and Silver Springs, MD markets. Its Chicago data center is located in Aurora. Following a planned future expansion, it will have 3.9 MW of commissioned power. Lincoln Rackhouse enters Chicago market with this transaction. 1547 Critical Systems Realty recently entered the Chicago market by acquiring two properties totally nearly 30 MW of capacity.
Outlook While Chicago is one of the largest data center markets in the US, the absorption has not been meeting expectations over the last six months. The recently-approved tax incentive plans are predicted to jump-start new data center development in the state.
Sources Datacenter Hawk 2019, Chicago Business, Data Economy, Stack Infrastructure
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Dallas/Fort Worth The Dallas-Forth Worth area is home to a dynamic data center market. The rise in commissioned power over the last twelve months in the Dallas / Fort Worth data center market has created a downward pressure on rental rates. Several 1 - 3 MW requirements are currently evaluating the market. The DFW market is host to ten data center facilities with over 10,000 SF of contiguous commissioned space available.
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Art Garden and Reflecting Pool in Downtown Dallas - Dallas, Texas.
Energy Texas’ independent power grid, managed by ERCOT (the Electric Reliability Council of Texas), is one of three main power grids that feed the continental United States, providing a strategic option for data center dependability. At around 4.2 cents per kWh, Dallas-Fort Worth offers some of the lowest power rates available, especially compared to markets like New York or San Francisco which is over 13 cents per kWh, or Los Angeles at over 14 cents. In addition, renewable energy packages are available upon request in Dallas.
Incentives Texas offers a sales tax exemption on equipment and electricity for data centers that contain at least 100,000 SF, invest at least $200 million and employ at least 20 people at above-average wages.
Dallas/Fort Worth: Absorption (in MW) 12.0 10.0 8.0 6.0 4.0 2.0 0.0
Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
Dallas/Fort Worth: Market Vacancy (Available Power/ Commissioned Power) 20.0% 16.0% 12.0% 8.0% 4.0% 0.0% Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
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Dallas/Fort Worth: Market Summary (by MW) Available Power
Commissioned Power
Planned Power
Under Construction Power
1000 750
673
500
672 170
361
347
376
370
250
49
60
14
0 Q3 '18
21
665
677
65
Q4 '18
7 Q1 '19
60
15 Q2 '19
Source: Datacenter Hawk Q2 2019
Available Space (SF) 513,470
Commissioned Space (SF) 3,331,607
Under Construction Space (SF) 118,600
Planned Space (SF) 3,886,443
Source: Datacenter Hawk Q2 2019
Development News
Outlook
Equinix is going ahead with its plans to build a new data center on a site next to Infomart in downtown Dallas. The four-story facility is scheduled to deliver first phase in 2020, and aims to attract both enterprise and hyperscale data center users.
The availability of larger amounts of commissioned power are causing rates to fall in Dallas. Dallas continues to gain traction with enterprise users seeking reasonable pricing in top facilities operated by both publicly and privately owned providers.
Stream is under construction with its seventh data center in the Dallas market in Garland. The first phase will be ready in Q3 2019, and when completed, the facility will hold up to 15 MW and 75,000 SF of commissioned space.
Sources Datacenter Hawk, H5 Data centers, NKF Global Knowledge Center Research
KDC is constructing the markets only true powered shell, a 24 MW, 130K SF property in the heart of Richardson’s Telecom Corridor. Following an acquisition of a 375-acre parcel in Q2 2018, Google is constructing their first large-scale project in Midlothian, Texas. Google plans to invest further $600 million into the project.
Transactions NTT Data recently sold two data centers to GI Partners for approximately $35 million. The largest of the two is NTT’s Plano campus which is made up of over 1 million SF of office and data center space. The second site is located in Quincy, Washington. NTT will remain a long-term tenant. RagingWire signed a new client, Citadel Analytics, in Q2 2019, and executed a lease at their Dallas data center. Citadel Analytics provides artificial intelligence solutions. NEWMARK KNIGHT FRANK
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Los Angeles Data center development in Los Angeles is focused in two areas of the city. While downtown development occurs in retrofit high-rises and connected buildings like One Wilshire, most purpose-built development occurs in western Los Angeles. What’s driving Data center demand in the region is the city’s connectivity. Los Angeles’ robust fiber infrastructure pulls in companies with strategic network and connectivity needs. Los Angeles is a prominent longhaul fiber termination point for lines running from the East to West Coasts. Multiple subsea cables also anchor in Los Angeles, connecting the city to South America, Australia, and Asia.
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Griffith Observatory, Los Angeles.
Energy The Los Angeles Department of Water and Power (LADWP) is preparing a proposal for a solar and storage power purchase agreement as part of its efforts to meet its green energy goals. LADWP’s proposal at 1.997 cents for solar and 1.3 cents for storage per kWh will potentially cover 5% of the energy capacity required to meet a goal of generating 100% of its electricity by 2050 from carbonfree resources. The deal also aims to optimize reliability of electricity transmission which is particularly appealing to the needs of data center operators.
Incentives California does not have state data center tax incentive legislation. Los Angeles offers some tax abatement strategies that Data centers can leverage. Data centers built in designated “Enterprise Zones”, such as areas with high unemployment rates, can qualify for tax credits of up to 100% on sales/use taxes paid for equipment purchases.
Los Angeles: Absorption (in MW) 3.0 2.5 2.0 1.5 1.0 0.5 0.0
Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
Los Angeles: Market Vacancy (Available Power/ Commissioned Power) 10.0%
Source: Datacenter Hawk 2019
8.0% 6.0% 4.0% 2.0% 0.0%
Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
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Los Angeles: Market Summary (by MW)
Available Power
Commissioned Power
Planned Power
Under Construction Power
200
147
150
147
100
148
148
147
50
31
13
1
0
37
13
Q3 '18
1
37
12
Q4 '18
1 Q1 '19
10
37 1 Q2 '19
Source: Datacenter Hawk Q2 2019
Available Space (SF) 69,726
Commissioned Space (SF) 1,586,593
Under Construction Space (SF) 10,000
Planned Space (SF) 218,350
Source: Datacenter Hawk Q2 2019
Development News
Outlook
Application hosting company, INAP, recently chose Los Angeles as the city’s location proved best for their low latency, uptime and connectivity needs. INAP also announced a 12,000 SF expansion of their existing Los Angeles data center. The expansion will add 1.8M MW power capacity and is anchored by DediPath.
The Los Angeles data center market is likely to be affected by Pacific Gas and Electric’s bankruptcy. The bankruptcy may negatively impact high energy prices, but it is also likely to slow down the state’s efforts to embrace 100% renewable energy sources.
Transactions
Sources
In Q1 2019, Digital Colony, a private equity firm, acquired Cogeco Peer 1’s data centers as part of Cogeco Communications portfolio, in a $546 million transaction completed in May 2019.
Datacenter Hawk 2019, Datacenter Dynamics, Techwire, Utility Dive, NKF Global Knowledge Research
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New York America’s largest city remains an attractive market for data center providers, despite the high cost of doing business. Data centers in NYC offer excellent location and expansive connectivity infrastructure. The market is dominated by multi-story data center format in re-fitted high-rise buildings, due to pressures on space available in the city. the main focus of data center providers in New York is upgrading aged infrastructure to meet consumer’s security needs. The financial sector tends to drive the demand in New York, followed by healthcare, insurance, media, and others.
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Skyscrapers in Manhattan at sunset, New York.
Energy In April, Governor Andrew Cuomo announced $280 million dedicated to energy storage projects. With this investment, New York will kickstart the growth of energy storage industry and decrease the cost of implementing energy storage projects. Also in April, GE Renewable energy announced a partnership to construct a hybrid solar + storage system in the north of New York metropolitan area. Together with Helios Energy, they will integrate two solar PV arrays and build two battery energy storage units, which are expected to store and generate up to 3 MW/12 MWh and 2 MW/8 MWh respectively.
New York: Absorption (in MW) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
Incentives New York provides a sales tax exemption for equipment used by Internet data centers. The potential for Rockland County to attract a growing number of data centers has increased with the creation of the Orange and Rockland Utilities’ electric substation. The possibility of data center tax incentives will help attract customers dramatically.
Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
New York: Market Vacancy (Available Power/ Commissioned Power) 12.5% 12.0% 11.5% 11.0% 10.5% 10.0% 9.5% 9.0% Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
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New York: Market Summary (by MW) Available Power
Commissioned Power
Planned Power
Under Construction Power
80
62
60 40 20
28 8
28 7
0
0
65
65
62
Q3 '18
0
28
28 7
Q4 '18
1 Q1 '19
7
1 Q2 '19
Source: Datacenter Hawk Q2 2019
Available Space (SF) 73,008
Commissioned Space (SF) 1,586,593
Under Construction Space (SF) 10,000
Planned Space (SF) 218,350
Source: Datacenter Hawk Q2 2019
Development News
Outlook
In 1Q 2019, DataGryd initiated an expansion of their capacity inside the 60 Hudson data center in New York. It is now close to delivering the expansion project and adding new availability to the New York market by adding 1 MW of commissioned power at the highly connected facility.
As Microsoft tests the first phases of their underwater data center prototype, cities with large populations and close proximity to water are viewed as logical targets should their efforts be successful. Because New York City is surrounded by water and is a prime location for micro data centers, it is a candidate for Microsoft’s underwater data center solution.
In May, UK-based IAAS provider Beeks Financial Cloud Group signed on at Equinix’s NY5 data center, as well as at Equinix’s LD4 London data center. NY5 and LD4 were strategic deployments for Beeks, as the two markets are some of the most financially influential cities in the world.
Sources Datacenter Hawk 2019, Clean Technica, NKF Global Knowledge Center
Transactions In January 2019, real estate investment firm CIM Group and data center operator 1547 Critical Systems Realty acquired a data center in Orangeburg, New York. The partially-occupied facility was previously owned entirely by 1547. The partially-leased New York data center offers approximately 5 MW of commissioned power. New York was home to one of Cogeco Peer 1’s data center portfolio acquired by Digital Colony in Q1 2019, in a transaction worth $546 million. The deal is expected to close in 2Q 2019 and will include a rebranding effort.
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Northern California More supply is under way in the second largest data center market in the U.S. Multiple new development projects are under construction in order to meet demand from companies within the market.
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Drone point of view of Silicon Valley in California
Energy AT&T announced that the company has invested more than $8.2 billion to boost networks’ reliability, coverage and speed in California from 2016-2018. This is $1 billion more than the previous three-year period 2015-2017. AT&T also deployed Band 14 spectrum in Los Angeles, San Diego, San Francisco and San Jose markets.
Incentives The state of California does not currently offer any specific incentives or tax credits. Certain markets in Northern California offer some local tax abatement opportunities. Santa Clara, example, has no city user tax which is worth a noticeable portion of tax savings.
Northern California: Absorption (in MW) 25.0 20.0 15.0 10.0 5.0 0.0
Q3 '18 Q4 '18
Q1 '19
Q2 '19
-5.0 -10.0
Source: Datacenter Hawk Q2 2019
Northern California: Market Vacancy (Available Power/ Commissioned Power) 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
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Northern California: Market Summary (by MW) Available Power
Commissioned Power
Planned Power
Under Construction Power
800 600
384
400
411
368
368
537
498
411
424
200 0
32
43
17 Q3 '18
5
42
Q4 '18
9 Q1 '19
36
11 Q2 '19
Source: Datacenter Hawk Q2 2019
Available Space (SF) 73,008
Commissioned Space (SF) 1,586,593
Under Construction Space (SF) 90,000
Planned Space (SF) 218,350
Source: Datacenter Hawk Q2 2019
Development News
Transactions
Vantage, one of the most active data center operators in Silicon Valley, is under construction with another building at their Mathew Street campus. The first building is scheduled for delivery in Q3 2019. An additional two buildings can be built on this site.
CyrusOne purchased an adjacent 8-acre site, giving them a total of 23 acres. The company is planning to deploy a total of 144 MW of comissioned power when the site is fully delivered, setting them on a course of long term growth in this strategic market.
CoreSite plans a Q3 2019 delivery of their new Santa Clara data center (SV8), currently under construction. An investment trust also purchased an adjacent 4-acre plot of land, in order to guarantee possible campus expansion when SV8 is delivered. 175,000 SF of data center space will deliver 18 MW commissioned power.
Outlook
Digital Realty intends to demolish the existing building in 651 Walsh Avenue and construct a new facility, 435,000 SF 4-story data center. When complete, this building will be one of the company’s largest in the area and will feature an on-site substation. In 2019, 1547 Critical Systems Realty began construction on San Francisco’s first purpose-built data center constructed in over a decade. Scheduled for early 2020 delivery, 1547 is constructing a 24 MW, 187K SF powered shell property on the land adjacent to the iconic 200 Paul telco hotel.
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In the last few months, Northern California saw an uptick of investor activity. Development in Santa Clara and the greater Northern California Data center market is increasing. Vantage, CyrusOne, Digital Realty, Edgecore, 1547 and several other data center operators are currently under construction and planning large projects in the market. This is likely to continue.
Sources Datacenter Hawk 2019, PR News Wire, Data center News, Data Center Frontier, SV Voice
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Northern New Jersey Northern New Jersey generates wholesale demand, as evidenced by CyrusOne and QTS’ success in the market, which is partly responsible for the current expansions. Absorption in New Jersey is low, however, meaning the market will see an uptick in vacancy. The upcoming 17 MW projected for delivery is double the amount of capacity absorbed in the market over the last two years.
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Houses of New Jersey.
Energy QTS recently signed an agreement to purchase the renewable energy equivalent to their IT load in Chicago and Piscataway, NJ, in an effort to reduce their environmental impact. As part of the agreement, QTS will purchase energy from the Rio Bravo wind farm in Starr County for 10 years. The announcement is part of QTS’ initiative to power all their data centers with renewable energy by 2025.
Incentives New Jersey offers tax credits and exemptions for projects including capital investment of at least $50 million and hire of at least 50 full-time employees for 36 consecutive months.
Northern New Jersey: Absorption (in MW) 4.0 3.0 2.0 1.0 0.0
Q1 '19 Q3 '18
Q4 '18
Q2 '19
-1.0 -2.0 -3.0 -4.0
Source: Datacenter Hawk Q2 2019
Northern New Jersey: Market Vacancy (Available Power/ Commissioned Power) 18.5% 18,0% 17.5% 17.0% 16.5% 16.0% 15.5% Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
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Northern New Jersey: Market Summary (by MW) Available Power
Commissioned Power
Planned Power
Under Construction Power
400 300
240
236
200 100
156 39
155 40
4
0 Q3 '18
240
240
4
144 43
Q4 '18
17 Q1 '19
140 41
20 Q2 '19
Source: Datacenter Hawk Q2 2019
Available Space (SF) 73,008
Commissioned Space (SF) 1,586,593
Under Construction Space (SF) 152,000
Planned Space (SF) 218,350
Source: Datacenter Hawk Q2 2019
Development News
Outlook
CyrusOne’s development of Somerset II Data Hall is nearly complete. Scheduled to open in Q3 2019, the extension should add 60,000 SF and 6 MW commissioned power to the market.
Northern New Jersey is set to grow substantially in the near future due to several projects under construction. Between now and the end of 2019, Northern New Jersey will grow by 17 MW.
Transactions:
Sources
DXC Technology is expanding their colocation services after purchasing Credit Suisse’s 285,000 SF data center facility at 201 Main Avenue in Clifton, NJ. The purchase was a sale-leaseback transaction, and Credit Suisse will lease their footprint from DXC on a 13-year term.
Datacenter Hawk 2019, New Jersey Legislature, NKF Global Knowledge Center Research
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Northern Virginia Data center development is driving Ashburn land prices to a record high in the world’s largest data center market. While the premium cost of land is pushing some data center development to areas like Manassas, some providers still prefer Ashburn.
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A trail at Lake Accotink, Springfield, Northern Virginia
Energy Dominion Energy, Virginia’s dominant electric utility, is under growing pressure from its most valuable customers (Salesforce, Microsoft and Apple among others), the world’s largest data center operators, to clean up its generation fuel mix and do it quickly. Companies have signed a joint letter submitted in May to Dominion, opposing its plan to build more gas-fueled power plants to meet growing energy demand. Instead, they want the utility to meet the demand with the combination of renewable energy generation and energy storage.
Northern Virginia: Absorption (in MW) 70.0 60.0 50.0 40.0 30.0 20.0 10.0
Incentives Most data center facilities are exempt from state sales and use taxes, so long as they spend at least $150 million and create between 25-50 new jobs in the area. Those tax breaks have since been extended through 2035, providing long-term visibility into operating costs for data center operators.
0.0
Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
Northern Virginia: Market Vacancy (Available Power/ Commissioned Power) 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
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Northern Virginia : Market Summary (by MW) Available Power 3000
Commissioned Power 2568
2373 1040
1000 0
1069
1048 83
46
91
41
Q3 '18
2606
2595
170
2000
Planned Power
Under Construction Power
44
Q4 '18
1108 126
Q1 '19
41
125 Q2 '19
Source: Datacenter Hawk Q2 2019
Available Space (SF) 73,008
Commissioned Space (SF) 1,586,593
Under Construction Space (SF) 152,000
Planned Space (SF) 218,350
Source: Datacenter Hawk Q2 2019
Development News
Sources
Compass started construction with the first building on their Northern Virginia data center campus in May. The campus can accommodate up to 500,000 SF of data center space at 75 MW of commissioned power when fully delivered. The first building will feature 6 MW of commissioned power.
Datacenter Hawk 2019, Data center Knowledge, Data center Frontier, Green Biz, NKF Global Knowledge Center Research
Transactions Digital Realty continues to acquire land in Northern Virginia and purchased a 13-acre parcel on Filigree Court in May. Company purchased the site for $28 million ($2.14 million/acre), making the transaction one of the highest in the area.
Outlook Northern Virginia unsurprisingly has the lead in leased data center space and amount of available capacity. It also has one of the highest projected growth rates in all global markets from 2017-2021.
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Phoenix Development in Phoenix tends to focus on five main areas around the market: Downtown (Iron Mountain, QTS), Chandler (CyrusOne), North Phoenix (Aligned), Mesa (EdgeConneX, EdgeCore, CyrusOne, Digital Realty) and Goodyear (Compass, Microsoft, Stream, Vantage) and there are currently projects occurring or planned in all these five clusters. Of all these projects, the majority were announced within the last year and a half. Additionally, most projects are for new campuses and not expansions on additional facilities or sites.
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Downtown lit by the last rays of sun at the dusk, Phoenix Arizona.
Energy Phoenix’s public utility provider, Salt River Project (SRP), approved changes to further improve their 2035 sustainability goals. Through this commitment, SRP will introduce stricter measures to curb carbon emissions. This process will also help to transit to cleaner energy sources to address implications of climate change. Arizona Public Service (APS) which serves most of the areas in Phoenix where data centers are located has also embarked on a mission to bring new clean-energy projects for its customers. Their plan is to bring a nearly gigawatt of new clean-energy projects by 2025.
Incentives Companies may claim exemptions from transaction privilege tax and use tax in connection with qualifying purchases of equipment delivered to and installed at the computer data center operations (CDC). For the investment qualified as a sustainable redevelopment project, benefits may be extended from 10 to 20 years following the year of certification. It includes also newlyconstructed computer data centers if the investment is at least $200 million.
Phoenix: Absorption (in MW) 25.0 20.0 15.0 10.0 5.0 0.0
Q1 '19 Q3 '18
Q4 '18
Q2 '19
-5.0 -10.0
Source: Datacenter Hawk Q2 2019
Phoenix: Market Vacancy (Available Power/ Commissioned Power) 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
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Phoenix: Market Summary (by MW) Available Power
Commissioned Power
Planned Power
Under Construction Power
2000 1500
500 0
14
223
20
10
Q3 '18
1198
1012
832
1000
223
20
10
Q4 '18
223
26
1193
20
Q1 '19
238
11
Q2 '19
Source: Datacenter Hawk Q2 2019
Available Space (SF) 73,008
Commissioned Space (SF) 1,586,593
Under Construction Space (SF) 56,000
Planned Space (SF) 218,350
Source: Datacenter Hawk Q2 2019
Outlook
Transactions:
Phoenix is quickly positioning itself as the next major hyperscale growth market and trails only Northern Virginia as US data center markets with the highest planned power capacity.
Google purchased a 187-acre parcel in 2Q 2019, where they will construct a 750,000 SF data center campus. The company plans to invest up to $1B developing the site over the next ten years, with the first 250,000 SF building coming online mid-2025.
Development News EdgeCore’s Mesa data center opened in May with 4 MW of commissioned power available. EdgeCore is the first Data center operator to deliver speculative capacity in the Mesa area. The 4 MW first phase is part of a much larger campus, which is designed to accommodate six, 32-MW facilities. Cyxtera recently expanded their Phoenix footprint by opening a data center in Tempe. Cyxtera is leasing their space inside Digital Realty’s 2055 East Technology Circle facility where they will develop 4 MW of commissioned power.
Microsoft purchased 151 acres in El Mirage for $20 million in May of 2019. The purchase not only shows Microsoft’s commitment to the area from a cloud region standpoint, but also reveals a dual strategy of both owning and leasing infrastructure in their different markets.
Sources Datacenter Hawk 2019, AZ Commerce, NKF Global Knowledge Center Research
H5 started the phase two construction of their Chandler data center in May. The new addition will add 6 MW and 25,000 SF when completed, more than tripling the data center’s current footprint. H5 intends to deliver the phase later this year.
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Seattle Seattle benefits from easy access to many large markets throughout the United States. The proximity to Silicon Valley and Los Angeles allows for an easy interconnection to those cities, as well as a direct connection to the growing Portland (Hillsboro) market. Seattle acts as a fiber and connectivity gateway to international markets as well, with access to Canada through Vancouver, and Asia through the Trans-Pacific cables running directly from Seattle to other countries. Seattle has been called a “Cloud City” thanks to its cluster of cloud computing and colocation businesses. The confluence of cloud infrastructure investments from hometown tech giants Microsoft and Amazon, relatively low power costs, and high-performance connectivity options drive continued data center growth in Seattle and its suburbs.
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Seattle Skyline.
Energy For customers planning a data center around green IT initiatives, Seattle City Light markets their electricity as “green,” generated primarily from hydroelectric and other “renewable” sources such as wind and (inexplicably) solar. In Seattle’s suburbs, investor-owned Puget Sound Energy is the provider with rates similar to Seattle’s. Typical rates paid for electricity serving industrial buildings in Seattle are between two to three times less than in the Northern California market.
Incentives Interestingly, Washington State’s incentives are only available for data centers built in rural counties with low population densities. To qualify, a data center would have to be built a minimum of 60 miles away from the Seattle market.
Seattle: Absorption (in MW) 2.0 1.5 1.0 0.5 0.0
Q1 '19 Q3 '18
Q4 '18
Q2 '19
-0.5 -1.0
Source: Datacenter Hawk Q2 2019
Seattle: Market Vacancy (Available Power/ Commissioned Power) 22.5% 22.0% 21.5% 21.0% 20.5% 20.0% 19.5% Q3 '18
Q4 '18
Q1 '19
Q2 '19
Source: Datacenter Hawk Q2 2019
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Phoenix: Market Summary (by MW)
Available Power
Commissioned Power
Planned Power
Under Construction Power
120
96
94
100
98
96
80 60
50
20
50
50
50
170
40
20
19
4
4
0
22
20
Q3 '18
6
Q4 '18
Q1 '19
4 Q2 '19
Source: Datacenter Hawk Q2 2019
Available Space (SF) 73,008
Commissioned Space (SF) 1,586,593
Under Construction Space (SF) 56,000
Planned Space (SF) 218,350
Source: Datacenter Hawk Q2 2019
Development News
Outlook
INAP recently expanded their relationship with bare-metal solutions provider Sovrn. Sovrn already held a presence in INAP’s New Jersey, Northern California and Chicago data centers, and now will operate in INAP’s Northern Virginia and Seattle Data centers.
One of the key reasons Seattle is a primary data center market is the area’s tech-centric economy. The U.S. Bureau of Labor Statistics notes there are over 850 companies with 18,250 jobs related to the information and communications technology (ICT) industry in the Seattle market. For this reason, the Seattle data center market is believed to continue to expand with its incumbent client base; however, many of the larger hyperscale opportunitites will likely fall to other markets with lower costs, more incentives, and fewer natural risk factors.
Transactions: In May, Lincoln Rackhouse announced their purchase of ByteGrid, a data center provider with locations in Chicago, Seattle, and Silver Springs, MD. Its Seattle data center is a 50,000 SF former NetRiver facility with 5.5 MW of commissioned power. Additionally, the facility is LEED Gold and Tier III certified. Lincoln Rackhouse now has a presence in Seattle capable of handling both enterprise and retail demand in the market.
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Sources Datacenter Hawk 2019, NKF Global Knowledge Center Research
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