Checking the Pulse of the Data Center Industry

UnitedLayer, a San Francisco-based managed infrastructure and collocation services company, just expanded for the third time in seven months. The company took an additional 6,000 sf at a Digital Realty Trust property at 200 Paul Ave. UnitedLayer now occupies nearly 35,000 sf in the 420,000-sf building, one of the Bay Area’s most popular turnkey data center sites.

Digital Realty owns, acquires, redevelops, develops and manages technology-related real estate. It specializes in providing Turn-Key Datacenter and Powered Base Building datacenter solutions for domestic and international tenants in a wide range of industries, from information technology and Internet enterprises to manufacturing and financial services.

UnitedLayer says demand is up for services like collocation. Also known as co-location, collocation and colo, collocation refers to the process of locating IT and networking equipment at an outsourced facility which has abundant and reliable data center power, mechanical systems and network access. Company CEO Arman Khalili says the goal is to “stay ahead of the curve” by outpacing customer demand.

But at the rate the digital universe is expanding, industry experts say that’s creating both challenges and opportunities. Just last month, four former members of Staubach’s National Contact & Data Center Practice took steps to help meet the challenge. The four–Pete Marin, Frank Lyles, Jason Chartrand and Jimmy Bailey–opened an Atlanta firm called T5 Partners LLC that will focus on developing data centers.

Marin says they want to “acquire or build centers from the ground up and participate in ownership,” adding that the firm is raising equity and actively pursuing land and facilities for data centers nationwide. “As we watched the expansion of the data center market over the past few years, we realized there is increasing demand for more efficient data center solutions and the supply is not keeping pace,” Marin says.

Statistic after statistic shows an imbalance between the supply of digital data and demand for storage space. However, there are also concerns that data center growth will lag because of the economic slowdown. In a recent report, Data Center Knowledge, a website devoted to daily news and analysis about the data center industry, warns it could be “crunch time.”

“Data centers are filled with servers and storage, and the demand for the facilities is driven by trends in information technology. But they are also real estate, and the supply of data centers is governed by the ability to finance these capital-intensive building projects,” it explains. Conditions in the commercial real estate markets are emerging as major influences in the future supply of data centers, it warns, and “for the remainder of 2008, the credit crunch is likely to be a major player in the data center market.”

Late last year, HSBC delayed plans to construct a $139-million, 275,000-sf data center in Niagara County in upstate New York. The project was designed to allow for future expansion to 350,000 sf, allowing HSBC to maintain and enhance their data operations for processing all bank transactions in the US and Canada.

But HSBC, in a brief statement, cites “the current economic business climate” for its decision to postpone the project. It continues, “We remain in the planning phase and will take appropriate steps to update local officials and surrounding communities as is necessary and appropriate.”

Plans to build other data centers, however, are moving ahead. One of the largest: Hartford Financial Services Group $100-million backup data center in Boulder, CO. IBM, which currently runs the company’s primary data center in Hartford, CT, will build and manage the center, which is designed to provide disaster recovery in the event the Hartford data center is knocked offline.

Economic development agencies nationwide are offering support. At the Spring Data Center World at the Las Vegas Convention Center, regional economic development agencies set up booths: the Virginia Economic Development Partnership, Nebraska Advantage, Temple (Texas) Economic Development Corp. and the North Dakota Department of Commerce. All four made it clear that they had space, and possible economic incentives, for data centers.

A fifth economic development agency, the town of Cedar Falls, IA, focused on the media. It distributed packages of economic development information addressing the region’s advantages for data centers.