Silicon Valley, synonymous with innovation and startups, is the home to many of the leading corporations that make the technology industry what it is today. Most other corporations that feature engineering/industry are also represented in the wider Northern California area, taking advantage of, and investing in, the world class higher education and research and development present in the region.
However, it is well documented that California is one of the higher risk locations for natural hazards, including seismic activity, fires and landslides. It also has high utility and land costs. Since land is at a premium some data centre providers are going vertical with multiple floors.
Though due to its corporate residents, and the fibre backbone that supports a low latency market, the data centre industry will always be strong in spite of the risks and the cost premium.
The data centre construction market in Silicon Valley continues to be warm with only an outright global recession ever likely to make it cold.
Digital Realty unveiled plans to expand its public cloud ecosystem by introducing dedicated and private access to the Oracle Cloud at its San Francisco and Silicon Valley data centres.
Raging Wire is currently building a 160,000 sq ft, 16MW facility, expected to be completed in 2020. Vantage is building up to 21MW at its CA-21 facility, and Coresite is rolling out 108,000 sq ft at its SV-8 facility.
Though highly unlikely to feature hyperscale deployment, we expect the Northern California data centre market to continue with steady growth, as a result of consistent year-on-year innovation and investment and general enterprise cloud adoption.
At present the long-term demand is over 400MW. In preparation for future builds Microsoft has bought 65 acres, Coresite has acquired 3.8 acres and CyrusOne 23 acres.
It should be noted that the wider construction industry in Northern California is most definitely hot, if not over-heated, and considered a contractors' market.
Phoenix has traditionally been a safe haven from California for disaster recovery as well as being a location for enterprise data centres. Phoenix has very low risk factors when it comes to natural disasters and is a location with inexpensive utility and land costs. It also has a concentration of major fibre providers spanning west to east.
However, Phoenix is now considered a hyperscale hotspot, and the local political momentum has created a business friendly environment with tax incentives attracting huge investment from cloud service providers.
For both new leases and active construction, Phoenix ranked second in the US to NOVA during 2019 with extremely hot market conditions. There are major projects underway for companies such as Vantage, Compass, Edgecore, Digital Realty, CyrusOne, Aligned Energy and Iron Mountain.
Vantage is currently building a $430m three-storey data centre in Phoenix for delivery in 2020.
Iron Mountain is building a data centre that will ultimately deliver 48MW of capacity.
Compass is currently building the first part of phase one of its facility, and it is expected to be completed by the end of 2019/early 2020. This is the first phase of six phases which will ultimately house 72MW of capacity.
2020 looks just as positive from a growth perspective: CyrusOne has purchased 68 acres, Digital Realty has acquired 56 acres, QTS 84 acres, Microsoft 260 acres and Compass 225 acres. These major tracts of land are for data centre construction planned in 2020 through to 2024.
The Dallas data centre market has seen tremendous and rapid growth over the past few years. It is now the number two market behind Northern Virginia. Dallas is ideally situated in the middle of the country, with an impressive fibre network and cheap land available. Utility rates are competitive and the state of Texas has its own independent power grid.
The data centre market is made up of downtown Dallas, the northern suburbs of Plano, Carrollton, Garland and Richardson, and reaches as far west as Fort Worth and as far south as Midlothian.
Dallas was traditionally an enterprise data centre market, though the colocation market followed. The enterprise data centres supported many of the Fortune 500 companies in the region as well as the healthcare, industrial and transportation segments. And it now also attracts the large hyperscale providers as enterprises continue to migrate to a managed cloud service.
The Dallas data centre construction market remained hot during 2019.
Facebook and Google continued with their multi-year construction programmes in Fort Worth and Midlothian respectively. Established wholesale and colocation operators also continued with expansions and new fit-outs, including those seen at CyrusOne, Digital Realty, Equinix, Stream and QTS.
The Dallas market shows slight signs of a slowdown for the beginning of 2020 with inventory at approximately 30%. However this will create an environment for future tenant leasing. Based upon the high business desire to be in Dallas that slowdown will be temporary.
North Virginia, aka NOVA, is home to the world’s largest data centre market. The region has low latency connections to national fibre networks, and is a low hazard risk area with relatively low utility costs.
It is also business friendly, attracting a mixture of enterprise and cloud service providers serving the government, aerospace, financial services, technology, managed services and telecommunications industries.
The Dulles corridor is the most concentrated, and is commonly referred to as “data centre alley” which is dominated by Fairfax and Loudon counties.
Data Centre construction market conditions remained hot through 2019. The cost of land in the Dulles corridor has jumped from approximately $500k/acre to almost $1.2m/acre in recent times. As such some investments are stretched to neighbouring Culpepper, Henrico and Prince William counties.
The major cloud service providers have accounted for over half of the growth, looking to top 300MW by 2020.
Digital Realty acquired 424 acres of undeveloped land in Loudoun County, Virginia. The site is adjacent to Washington Dulles International Airport and located near bulk transmission lines as well as a major fibre path.
EdgeCore are developing 36.8 acres of land to build a new data centre campus in Sterling, Northern Virginia. It will provide up to 144MW of critical capacity when fully built. First phases are due in 2020.
QTS is currently expanding in Ashburn and Manassas with new facilities. These sites are hyperscale facilities scheduled to open late 2019 or early 2020. QTS will ultimately have over 100MW of capacity in Northern Virginia.
CoreSite has brought its VA-3 site online and is actively planning the expansion of its data centre campus in Reston, Virginia, adding an extra 50MW of capacity. The next expansion will be a total of 660,000 sq ft.
Other established operators with publicly announced new developments include: Core-site, Compass, Sentinel and Vantage.
With well over 300MW coming online in 2020 and 2021 the market growth is still forecast to continue and accelerate in both years.
Some industry watchers however, such as Data Centre Dynamics, err on the side of caution regarding the 2020 and 2021 expansion, noting a slight slowdown as a result of excess inventory.
The New Jersey data centre market was always host to the neighbouring New York City business districts. The Sarbanes-Oxley Act came along and the New Jersey data centre industry exploded. Any active trading meant you had to be within a certain fibre distance from Wall Street and have a synchronised data centre facility.
The data centre colocation market also benefited for the same reason, though typically on a retail basis.
Sometimes a location has many expenses that other markets do not have, and New Jersey is one of the more expensive markets after California as far as real estate and utility costs are concerned.
Data centre growth for New Jersey is warm with some exceptions. Most work is for fitting out the existing inventory for such companies as Digital Realty, Cyxtera, Coresite and QTS.
JPMC is currently the largest builder of data centres in the region with very robust synchronous facilities under construction in Totawa, NJ and across the border in Orangeburg, NY. In these instances, it’s exciting for the enterprise data cecooltre market to make such a resurgence.
The market may still be slow going into 2020 but expect an uptick as inventory shrinks and from companies such as Equinix, which is planning three new facilities within their Secaucus campus.
And although the high cost of real estate and power distract any investment for hyperscale development, it remains the ideal location and proximity to New York City and its financial engine. Look for a strong surge in 2021 from the colocation providers and maybe even a few enterprise facilities to support active trading in NYC.
Toronto is the leading Canadian data centre market. In comparison, it is almost double the size of Montreal. The Greater Toronto Area (GTA) hosts Canada’s largest commercial centre, with a reputation as being a business and tax friendly environment. It has excellent fibre connectivity, cool ambient temperatures, and is a low risk for natural disasters.
Toronto electricity tariffs prove good value when compared to adjacent US cities.
The GTA is also home to the Toronto to Waterloo Technology Corridor, the second largest technology cluster in North America.
The data centre construction market in Toronto continued to be warm during 2019 with slow, but steady growth.
Cologix has just brought on one facility at 4MW and is about to deliver another 3MW at another location.
The Urbacon Data Centre Solutions (UDCS) DC2 facility – in Richmond Hill, Barker Digital campus – featured ground up construction in 2018. This is a 16MW facility and the second of potentially five data centres on the campus. This facility will have ongoing fit outs into next year.
Oracle Cloud Infrastructure opened a new data centre in Toronto at the beginning of 2019.
Other data centre providers active in Toronto are zColo, Equinix, CenturyLink (Cyxtera) and Digital Realty.
As a mature data centre market, the established US retail colocation providers have a strong presence in Toronto and will continue to invest. The market right now does have some inventory at this time which means that investment may show itself in late 2020.
However, we expect Montreal to continue to attract the hyperscale developments in Canada due to cheap utilities and both availability of and competitive prices for suitable land.
Buenos Aires, a metropolitan area of 14m people, is the business centre of Argentina, featuring major trade, financial services, industrial, education, tech startups, agriculture and transportation activity.
The city has low natural disaster risks but, like São Paulo in Brazil, does have a fluctuating economy with increasing utility rates.
According to Cloudscene.com, the city area has only minimal data centres and service providers, though research shows Equinix, Neolo, Inter.net, Telecom Argentina, Ringo DCI, G2K and Skyonline to be operational there.
Data centre construction in 2019 moved to warm from cold in 2018, with noticeable announcements in the second half of the year:
August 2019 – EdgeConneX launched an “edge” data centre in Buenos Aires, with an initial 1MW deployable and scalable to 10MW. This was the first carrier neutral colocation option in Buenos Aires, as most other providers were telcos. The location at Parque Industrial Pilar provides good access and is able to serve as a hub to hundreds of national and multinational companies.
September 2019 – EdgeUno, a Silicon Valley edge data centre startup focusing on Latin America, launched four new data centres in South America – in Sao Paulo and Rio de Janeiro in Brazil, Santiago in Chile and Buenos Aires in Argentina.
October 2019 – it was announced that Amazon Web Services had won local government approval to open a data centre in an Argentine free-trade zone. The investment will be located across the Bahía Blanca-Coronel Rosales districts of Buenos Aires Province, at an estimated cost of US$800m.
We expect the rate of growth/take up in the developments announced in 2019 to dictate the construction market conditions for 2020.
The potential market in Brazil is great, with a population of over 200m citizens. São Paulo is the financial hub and economic engine behind the nation.
Despite the low natural hazard risks and dense population, the data centre market as we know it is relatively new in Brazil, with large scale colocation facilities only recently established.
The limited infrastructure, high taxes, an economy known to fluctuate and a difficult construction market can all influence foreign investment.
The established data centre providers in Brazil are Ascenty, Obata SA, Equinix, Telefonica and CenturyLink.
Brazil has featured heavily in recent mergers and acquisitions and joint ventures, and this brings investment that could take today’s cold data centre construction market conditions to warm very quickly.
The biggest news in 2019 was the acquisition of Ascenty by Digital Realty. Ascenty is the largest data centre provider in Latin America, heavily centred in São Paulo. It also owns its own fibre network. Its most recent construction will add another 20MW to the market in the fourth quarter of 2019.
The Equinix acquisition of Verizon’s assets includes the IBX site, SP3, which is in progress to grow to 13.3MW.
IBM and Equinix have announced a partnership to expand cloud services in Brazil. This will ensure cloud access and growth in the region through to 2022.
Construction is understood to be underway for new subsea fibre landing stations, and associated edge facilities to bring a point-of-presence.
With the trend of mergers and acquisitions, limited natural hazard risks and the arrival of several new fibre landings in Brazil – that give it direct access to the US – the future of the data centre market in São Paulo looks bright. Although any potential political instability and effects on international trade could threaten its potential.
Santiago as we know is a high seismic risk but has few other potential natural disasters. Electrical grid and distribution is well established. Santiago has a higher number of free cooling days than the competing Latin American hubs of Buenos Aires and São Paulo.
As far as a fibre infrastructure is concerned, the region was strengthened by the landing of a subsea cable, and Andean Tower Partners, a Digital Bridge company, acquiring the Torres Unitas telecommunications business. This is a great sign for connectivity and financial investment in the region.
Another positive for the region is Telefónica building a robust and modern data centre just outside Santiago. This data centre is tied into the Telefónica global network of data centres, allowing wide scale colocation, hosting, IaaS and managed services. This will ensure continued confidence and growth in the region.
The established data centre providers in Santiago are Google, CenturyLink (Cyxtera), IBM Softlayer, Sonda and Optic Fusion.
Data centre construction market conditions remained warm during 2019 but are heating up further.
Sonda is expected to be completing a tier IV data centre aimed at banks, financial institutions and utility companies, though a public announcement of status and timing of opening has not been made public.
Ascenty, with investment from its new owners Digital Realty, is also thought to be completing a data centre, with phase one coming online in 2020.
In July 2019, Google submitted a filing to the Chilean Environmental Assessment Service (Servicio de Evaluacion Ambiental, or SEA) to start an environmental appraisal process, required for new construction. Its investment plans are reportedly for a second data centre campus in the Santiago area. In addition, Google’s subsea cable system is to land at Equinix LA4. This Chile to Los Angeles cable system is projected to finish in late 2019 or early 2020.
There has also been news of investment from the East, with Huawei opening its first cloud region in LATAM in Santiago, in August 2019.
With speculation mounting in regards to the arrival of other hyperscale providers in Santiago, it will not take much for the warm market conditions to heat up.
The Ascenty/Digital deal is a multi-year, multi-MW commitment beyond 2020.
And we expect investment from Asia to continue, with rumoured feasibility studies happening to run a subsea cable from Chile direct to Asia (bypassing the US).