Survey Sees Continuing Datacenter Growth
The steady transition of digital businesses to the cloud is driving robust growth in the U.S. datacenter market, with Dallas and the Northern Virginia areas leading the way in 2014 as each market attracted nearly 40 megawatts of new datacenter leases.
In a market survey released this week by the commercial real estate broker Cushman & Wakefield, the Dallas area attracted some of the largest wholesale datacenter deals over the last year. Those included leases with LinkedIn (7 MW), T-Mobile (4.5 MW) and the insurer State Farm (more than 6 MW).
In datacenter hotspots like the Dallas area, Cushman & Wakefield reported "competitive" pricing despite strong demand. Indeed, some datacenter service providers are having trouble meeting surging demand. For example, the report cited Digital Realty, the largest landlord in North Texas, would not have new datacenter capacity available until later this year.
Meanwhile, secondary markets are also booming. The report cited a new Portland, Oregon, facility being built by T5 Data Centers with an unnamed "multi-megawatt anchor tenant." Elsewhere, eBay is an anchor tenant at a planned datacenter in Reno, Nevada.
While there are signs that the market is maturing in some regions as major players like Facebook sublease datacenter space, the report envisions possible datacenter supply constraints later this year.
Hence, "datacenter operators continue to become more disciplined and sophisticated in phasing in new supply," the market survey noted. "With a burgeoning pipeline of tenant requirements pointing to sustained demand, there are growing concerns that some markets may see temporary pockets of supply constraints—similar to conditions in Northern Virginia this time last year."
Along with Dallas, the Minneapolis area is also seeing expanded datacenter investment. Among the top investors are CenturyLink, IronGate, Stream Data Centers and ViaWest, the market survey found. As regional demand for cloud and other services grow, the Minneapolis datacenter market "has moved from dramatically undersupplied to now having a wholesale market capable of attracting sizeable deployments," Cushman & Wakefield said in its Winter 2015 market survey.
Generally, the survey found that datacenter pricing has started to stabilize despite strong demand for leases. While wholesale rates remained relatively flat during 2014, averaging between $125 and $140 per kW per month, the market survey found relatively aggressive pricing even in competitive markets for both large deals or agreements with plenty of upside potential.
Firmer pricing is expected this year as the largest datacenter providers tighten up on price concessions and the ramping of new capacity, the survey predicted.
Chicago, Miami and Minneapolis had some of the highest current prices, all at or above $180 per kW per month at the high end of the range. Meanwhile, Dallas, Las Vegas and Portland, Oregon, were among the lowest with prices trending below $120 per kW per month.
The market survey also reported that Zayo Group, the datacenter colocation specialist based in Louisville, Colo., continued its acquisition binge. Zayo announced a $675 million deal in January to acquire Latisys, which operates datacenters in Orange County, Calif., Chicago, Denver and Northern Virginia. It also offers colocation and cloud services in London, where Zayo's European headquarters are located.