Special Report Data Centers: Considerations for Data Center Site Selection

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1 Special Report Data Centers: Considerations for Data Center Site Selection JANUARY 2010

2 RENOVATE OR BUILD? Most corporate searches for data center sites investigate vacated data centers for renovation and greenfield sites for new construction. Intuitively, some believe that renovating existing data centers would be less costly and take less time. In fact, the opposite is true in most cases. Most data centers are vacated because of functional obsolescence and the inability to adapt the facility to take advantage of new technologies such as free cooling. Companies budget between $1,000 and $1,400 per square foot for Tier III and IV data centers. In areas of the United States that are not prone to natural disasters, the cost of constructing the building shell is between $75 and $120 per square foot. So, for about eight percent of the total project costs (which is most likely comparable to the purchase price of an existing data center) a company can build new without the risk of inherent problems associated with a data center vacated by a previous user. From a timing perspective, there are fewer risks associated with developing a new data center to a company s exact specifications. Because there are no legacy systems to investigate or to retrofit, there are fewer unknowns that add to costs and could impact the project schedule. Existing systems cannot easily, or at all, be adapted for free cooling. Located in the right region of the United States to take advantage of free cooling, a new data center utilizing air economization systems can save a company up to 30% percent of power charges associated with cooling. Companies should not let eight percent of the total project costs deter them from a 100% solution to their data center needs. The following pages detail criteria that companies should consider when evaluating data center locations whether they renovate existing or build new facilities. What the Experts Say By 2011, more than 70% of U.S. enterprise data centers will face tangible disruptions related to floor space, energy consumption and/or costs. During the next five years, most U.S. enterprise data centers will spend as much on energy (power and cooling) as they will on hardware infrastructure. Gartner, Inc. U.S. Data Centers: The Calm Before the Storm Page 2 Of all the decisions you make regarding the data center, where you put it is most critical. Putting a data center in downtown New York is just wrong. You need high availability of electricity, low power rates and a moderate climate so you can use the outside air to cool the data center. Michael Bell Research Vice President Gartner, Inc

3 DATA CENTER SELECTION The selection criteria for a data center site is personal to the corporation. From company to company, the weighting of the criteria will be different. The discussion below supports the recent development of major data centers in the above U.S. cities. Natural disaster events that may eliminate geographic areas of the United States. :: Hurricane prone areas elimination of many coastal areas :: Tornado areas elimination of Tornado Alley (Texas Panhandle, Oklahoma, Kansas) :: Earthquake seismic areas elimination of California, South Carolina, etc. NOAA Satellite and Information Service National Environmental Satellite, Data, and Information Service (NESDIS) Source: U.S. Geological Survey Program Earthquake Hazards Page 3

4 DATA CENTER SITE LOCATION DRIVERS THAT ARE CONSIDERED BY MANY CORPORATIONS. 1. Power Availability, Reliability and Cost The power grid in the Northeastern United States is in trouble. Transmission congestion has a direct impact on reliability and the price of energy. The Blackout of 2003 left 60 million citizens in the dark with a cost of lives and an estimated $60B-$10B USD in economic losses. It is estimated that data centers consume 2% of all power in the United States. A Tier IV data center of 80, ,000 SF in size demands 5 to 30 megawatts of power. Many companies require dual power feeds from diverse substations on a reliable power grid. The uptime history of the power utility to a service area is critical to vetting sites for a data center. 2. Fiber Connectivity and Reliability Data Center sites should have access to multiple local fiber feeds. The city in which the data center site is located should be serviced with long-haul fiber from multiple carriers connecting to other cities across the United States. 3. Latency - The amount of time it takes a packet of data to move across a network connection can be critical to a company s data center. Companies have different latency tolerances based on the functions that the data center will perform. Companies requiring synchronous computing for mission critical applications require near-urban locations close to their primary business functions. The majority of data centers can locate in geographic areas, with tolerable latency, that can take advantage of lower costs of operation. 4. Free Cooling / Air Economization Free cooling is a technology where low external air temperatures are utilized to chill water that is circulated to cool air in data centers. ASRAE is the organization that many companies look to for the establishment of environmental performance criteria for the operation of data centers. ASRAE has recently revised its temperature threshold for data centers to 80.6 degrees Fahrenheit. By locating a data center in an area of the United States with ambient temperatures of 80 degrees Fahrenheit or below and by utilizing Free Cooling technology, companies are able to reduce their power usage for cooling by 30% or more....continued on next page Page 4

5 DATA CENTER SITE LOCATION DRIVERS...CONTINUED 5. Business Incentives and Tax Considerations Economic development packages come in many forms and are offered by state and local authorities as well as some utilities. Some of the more known incentives that may be offered include: - Real Property Tax Abatement - Personal Property Tax Abatement (some states have no personal property taxes) - Infrastructure Grants - Job Tax Credits - Job Training Reimbursement 6. Workforce Quality and Availability Companies look to communities with colleges, universities and technical schools with strong IT programs to ensure the availability of a quality IT workforce. They also look to communities with an established peer group of data centers. FOR MORE INFORMATION, PLEASE CONTACT: Doug Godard, MCR, LEED AP Senior Vice President CBRE Global Corporate Services doug.godard@cbre.com Jerry Reich, LEED AP Managing Director CBRE Global Knowledge Network/ Critical Environments jerry.reich@cbre.com Randy Pereira Senior Vice President CB Richard Ellis randy.pereira@cbre.com Page 5

6 ABOUT THE AUTHORS Doug J. Godard, MCR, LEED AP Doug Godard is a Senior Vice President in the Technology Practice Group with CB Richard Ellis, Inc. For over 26 years, Doug has continued to assist clients with the optimization of their corporate real estate portfolios, assist clients with data center solutions and design/build projects. Doug is a registered lobbyist in the State of Ohio and is a LEED Accredited Professional. Jerry Reich, LEED AP As the Global Knowledge Network Practice Leader for Critical Environments, Jerry is responsible for the organization and leadership for the Americas working in partnership with his counterparts of EMEA and APAC. Jerry has over 23 years of global project management and owners representation experience as a result of managing projects and project teams throughout the US, Canada, South America, Europe, South Africa and Asia Minor. His broad range of project experience includes general administrative offices, ground-up property development, Tier IV data centers, top secret facilities, as well as healthcare and bio-tech centers. Jerry is a LEED Accredited Professional. TEAM MEMBER Randy Pereira Randy Pereira, a senior vice president at CB Richard Ellis, provides real estate portfolio financial advisory services to a client base consisting of prominent corporations and public entities. These activities encompass the development, design and execution of portfolio financial strategies that are well-aligned with the overarching financial and operational objectives of the client organization. During his 25 year career in finance, Mr. Pereira has served as advisor in some of the real estate industry s most prominent transactions, and has gained national recognition from organizations such as Standard & Poor s for his skill at managing the complex blend of Legal, GAAP, Tax, FASB, Rating Agency and regulatory issues that accompany highly-structured transactions. ABOUT CB RICHARD ELLIS CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world s largest commercial real estate services firm (in terms of 2009 revenue). The Company has approximately 29,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis Corporate Communications Department or CB Richard Ellis research and econometric forecasting unit, CB Richard Ellis Econometric Advisors. Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis. Page 6