Special Report Data Centers: Why the Great Demand for Data Centers?

Transcription

1 Special Report Data Centers: Why the Great Demand for Data Centers? OCTOBER 2010

2 WHY THE GREAT DEMAND FOR DATA CENTERS? There has been much written over the past two years about the lack of liquidity in the capital markets and how it has impacted business expansion. Interestingly, the capital markets have not slowed corporate demand for data centers. Data centers are essential to the viability of corporations. The C-Suite has deferred their decision as long as they could. They now have to take action. There are two main categories of data centers. Enterprise data centers are those facilities that are dedicated to the IT functions of one company. Historically, many of these data centers have been located at the corporate headquarters. If not in the headquarters, then the data center would have been located in a free standing building within 60 miles of the headquarters. According to Gartner, about half of these enterprise data centers are functionally obsolete. Technology has created new requirements that have surpassed the physical capabilities of many data centers. Technology has also reduced the footprint of the data center. A server used to be the size of a home stereo receiver. Today s blade servers look like printed circuit boards stacked in dense vertical rows. These blade servers are housed in cabinets that may exceed the weight of a large automobile calling into question the structural integrity of the floor of the building. This server density also demands a large power load to run and to cool the equipment. Many existing data centers have simply run out of power and the electric circuits feeding the building cannot be upgraded no more power is available from the utility. The second type of data center is a colocation facility which is owned and operated by a third party. Some companies are now leasing space for their data center servers at these colocation facilities. Because the corporate data center footprint has been reduced, companies may now only need a 10x10 caged area to house their servers. Or, they may be coming out of a 25,000 SF floor in their corporate headquarters and may now only need 5,000 SF. The company will pay $50 to $100 per square foot per month plus power for this space. Even at these rates, it is less expensive than the $800 to $1,000 per square foot to construct a Tier III enterprise data center. Realistically, it is not economical to construct a free standing enterprise data center less than 20,000 SF because the infrastructure costs cannot effectively be spread across the square footage of a smaller project. Page 2

3 Disaster Recovery (DR) requirements are also driving data centers. Banks and insurance companies are mandated by regulators to establish DR sites for their data centers. The events of 9/11 highlighted the vulnerability of corporate data centers when geographically concentrated. Corporations are establishing data center sites within a specific distance (latency tolerance) from their primary data centers so that they can replicate their data at the speed of light. Technology is driving data centers. The term Cloud Computing has become more prevalent. Cloud computing allows companies to house applications and store data remotely for retrieval anywhere in the world. Instead of logging on to a local server, a person would log on to an application that resides somewhere on a distant server in a data center somewhere in the world. Pharmaceuticals are placing their research and drug trials on servers in the Cloud. Universities, governments, military contractors and others with a need to store vast amounts of data are looking to the Cloud. Another technology called Virtualization is allowing multiple applications to reside on the same server which allows better utilization of servers. These new technologies cannot be implemented in many of the existing enterprise data centers. The data center market is already large and the demand is accelerating. CBRE Project Management in 2009 undertook over $1 billion in mission critical construction projects globally and CBRE is currently developing financial structures for clients on another $1 billion in data center projects. Companies are internally funding many of these enterprise data centers. Billions of dollars of venture capital money are funding many of the colocation facilities. Digital Realty Trust, the largest colocation player, is a REIT. In the Midwest, the New Albany Business Park highlights the activity in the data center market. The New Albany Business Park is a 3,000 acre development that is located in the Columbus suburb of New Albany, OH. Nationwide Insurance (200,000 SF 7 MW), Motorist Insurance (40,000 SF 1.5 MW), and TJX (83,000 SF 5 MW) are under construction with enterprise data centers. These three projects alone represent about $250M in new construction. Corporate executives are facing difficult decisions over the next five years regarding their companies IT agility and the impact on their data centers. Demand for data center space is high and the supply is limited. CIOs and CFOs are seeking trusted advisors to provide not only analysis regarding initial CapEx and OpEx, but must now think in terms of Life Cycle Solutions and Total Cost of Occupancy. Because many corporations have deferred data center decisions as long as they could, many are now are faced with fasttracked projects on shovel ready sites or colocation. We are now experiencing the initial phase of a large data center market in transition. Page 3

4 ABOUT THE AUTHOR Doug J. Godard, MCR, LEED AP Doug Godard is a Senior Vice President in the Critical Environment Practice 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. TEAM MEMBERS 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. 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 over-arching 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 THE CBRE CRITICAL ENVIRONMENT PRACTICE The CBRE Critical Environment Practice is the industry s largest integrated team of data center brokerage, project management and facility management professionals. The CBRE Critical Environment Practice provides unparalleled, one-stop access to industry subject matter experts to service all aspects of data center, critical facilities management and optimization strategy. Our collaborative teams provide a life-cycle approach to data centers drawing upon the best analysts, data center transaction professionals, project and construction managers, and critical facility operations and maintenance engineers in the industry. 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 Page 4

5 FOR MORE INFORMATION, PLEASE CONTACT: Doug Godard, MCR, LEED AP Senior Vice President CBRE Global Corporate Services Critical Environment Practice Jerry Reich, LEED AP Managing Director CBRE Global Knowledge Network/ Critical Environments Randy Pereira Senior Vice President CB Richard Ellis 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 5