DATA CENTER PERSPECTIVES. National Data Center Market Update, Q2 2015

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1 GLOSSARY OF TERMS DC Abbreviation for data center RFSF Abbreviation for raised floor square footage Powered Shells Purpose built or hardened shell; Power and Fiber to site; No equipment included Carrier Hotels Single buildings with multiple fiber providers and generally support retail colocation providers Wholesale Colocation Building shell & infrastructure to PDU providing space, power & cooling; Generally in demised suites above 250 kw Retail Colocation Building shell and infrastructure in shared environment, space generally divided by racks or cages; May include IT hardware as well as a menu of services Enterprise Centers Hardened data center; Houses mission critical operations of individual companies Greenfield Sites Areas/Sites identified to build to suit data centers; Typically close to power/fiber Significant Construction Meets Demand Across Primary Data Center Markets Significant demand for data center space continued throughout primary wholesale colocation markets in the first half of Deliveries of new construction have been able to keep pace with large amounts of demand absorbing 94.8 MW of critical power in the first two quarters alone - a rate that is on track to match 2014 absorption levels. To keep pace with the volume and velocity of leasing, providers have responded with 99.9 MW of new construction deliveries since the beginning of Another MW of inventory is in the construction pipeline up 76.6 MW from Q As a result of increased demand primary markets are reporting lower vacancy rates despite notable construction deliveries. With the compression of vacancy rates across all markets, upticks in lease rates are occurring in some markets while others continue to hold firm on current rates. Financial services, technology, social media and healthcare sectors are driving demand in the data center space - a trend that is expected to continue for the foreseeable future. The prevalence of non-redundant (N ) requirements is growing among the technology and social media sectors with users from other industries seeking similar redundancies for high performance computing (HPC) solutions. Transactions are becoming larger in terms of power and space leading to increased pre-leasing activity as users demand contiguous space for their data center footprint. Pre-leasing is more successful among established providers that are financially sound and can deliver a proven quality product. NOTEWORTHY MERGERS & ACQUISITIONS 2015 Data Center Providers Digital Realty Trust Cloud/Service Provider Telx Acquisition Value $1.9 B Equinix Inc. Telecity $3.6 B QTS Realty Trust Carpathia $326 M CyrusOne Cervalis $400 M Source: CBRE Data Center Solutions, Q A flight to quality is also being seen throughout the industry as end users are vacating antiquated facilities and occupying newly conditioned data center space. Existing data center space in offices is also being moved to colocation facilities in response to rising office rents and need for higher quality space to house their technology. Throughout the industry, cloud computing is becoming an integral part of the evolving data center strategy. Providers are responding to the need for this offering with acquisitions of cloud companies and developing their own cloud services. Growth in the cloud sector is expected to be substantial. According to Cisco s Global Cloud Index, cloud data center traffic is projected to grow at a rate of 32% annually, or four times faster than traditional data center traffic, between 2013 and 2018.

2 Q PRIMARY WHOLESALE COLOCATION MARKET SNAPSHOT Market Quarter Inventory Vacancy Absorption Rental Rates (kw/mo)* Northern Virginia Q1 417 MW ( 15.0 MW) 21.2 MW / 5.1% ( 24.1%) 20.8 MW ( 11.9 MW) $130-$145 Q2 421 MW ( 3.6 MW) 15.5 MW / 3.7% ( 27.7%) 9.4 MW ( 11.4 MW) $130-$145 Phoenix Q1 218 MW ( 5.0 MW) 4.1 MW / 1.87% ( 0.1%) 5.0 MW ( 2.8 MW) $140-$160 Q2 228 MW ( 10.0 MW) 4.1 MW / 1.87% ( 0.0%) 10.0 MW ( 5.0 MW) $140-$160 Atlanta Q1 127 MW ( 0.6 MW) 25.7 MW / 20.2% ( 2.4%) 0.7 MW ( 1.8 MW) $125-$150 Q2 127 MW ( 0.0 MW) 24.3 MW / 19.1% ( 5.2%) 1.4 MW ( 0.7 MW) $135-$150 Silicon Valley Q1 131 MW ( 14.9 MW) 16.1 MW / 12.3% ( 10.7%) 14.7 MW ( 11.7 MW) $140-$150 Q2 134 MW ( 3.6 MW) 15.8 MW / 11.7% ( 4.6%) 3.9 MW ( 10.8 MW) $130-$150 NYC/NJ Q1 134 MW ( 11.4 MW) 21.7 MW / 16.2% ( 0.5%) 10.1 MW ( 3.8 MW) $145-$165** Q2 135 MW ( 1.5 MW) 22.2 MW / 16.5% ( 1.4%) 1.0 MW ( 9.2 MW) $150-$170 Chicago Q1 117 MW ( 2.4 MW) 3.4 MW / 2.9% ( 7.9%) 2.6 MW ( 1.6 MW) $145-$165 Q2 130 MW ( 13.0 MW) 10.9 MW / 8.40% ( 189.7%) 5.5 MW ( 2.8 MW) $145-$165 Dallas/Fort Worth Q1 131 MW ( 18.6 MW) 23.7 MW / 18.0% ( 68.1%) 7.0 MW ( 1.9 MW) $125-$155 Q2 132 MW ( 0.7 MW) 21.5 MW / 16.3% ( 9.6%) 2.8 MW ( 4.2 MW) $125-$155 *Rental rates are quoted asking rates from providers for 500 kw. CBRE experiences that actual contract rates fall below these numbers. **Quoted rates are outside of NYC proper. NYC (Manhattan) wholesale rates average $225-$300/kW/mo. DO NOT EDIT Q1-Q DATA CENTER CONSTRUCTION PIPELINE Source: CBRE Data Center Solutions, Q Arrows reflect quarter-over-quarter changes. Q Q Dallas/Fort Worth NYC/NJ Chicago Silicon Valley Atlanta Phoenix Northern Virginia Construction Volume (MW) Source: CBRE Data Center Solutions, Q

3 PRIMARY MARKET DALLAS/FORT WORTH The Texas economy continues to create opportunity across the state and growth in Dallas is leading the way. The Dallas-Fort Worth Metroplex (DFW) recently ranked second in the country in terms of population growth, second in the country for tech growth, and third as one of America s fastest-growing cities. Office and industrial rents are reaching record highs in many submarkets and land transactions continue to push further North, South, East and West, away from Dallas central core. Despite the recent decline in oil prices, the energy sector s overall effect on the DFW market has been minimal. Dallas/Fort Worth Despite the recent decline in oil prices, the energy sector's overall effect on the DFW market has been minimal. Low taxes, low cost of living, high quality of life, and high paying jobs are all significant drivers to the DFW area and many out of state corporations are taking note. Boston-based Liberty Mutual is developing a large service center in Plano, north of Dallas. Toyota has broken ground on its new corporate headquarters and will move nearly 4,000 employees from Los Angeles to the DFW area. And in February of this year, State Farm began moving the first of its 8,000 expected North Texas employees to Richardson, a suburb of Dallas. Dallas continues to be recognized as a domestic tech hub and as these large corporations continue to focus resources in North Texas, we believe that trend will continue. In an effort to keep up with other tech savvy states across the country, the State passed Texas House Bill 1223 in June of 2013,which allows for 100% sales tax exemption on all business personal property for data center users that exceed certain building and spending thresholds. Texas has been rewarded with many opportunities and new data center operators in recent months, due in part to this new legislation. Data center users such as TD Ameritrade, Aligned Data Centers, Infomart Data Centers, and Facebook now call Dallas home. In June, Facebook announced its new $1 billion, 750,000 sq. ft. data center project in Fort Worth, which will be its 5th data center location worldwide. Approximately 36 MW of wholesale critical load has been added to the marketplace over the past 12 months and this quarter alone there has been over 15 MW of absorption with T5 Data Centers and Digital Realty accounting for just over 10 MW of net leasing. Currently there are six wholesale providers capable of accommodating over 1 MW of contiguous space in the DFW area: QTS, CyrusOne, Digital Realty, CenturyLink, InfoMart, Aligned Data Centers and DataBank. Development continues to grow with 43.4 MW currently under construction and another 166 MW planned for development over the next four years. Overall, rates have remained flat between $125/kW/mo - $155/kW/mo (plus metered power) and are expected to remain steady as long as absorption rates remain around MW per year. As business activity in the Dallas market continues to flourish, data center activity should continue to increase. Providers continue to plan and build large-scale, turn-key data center project in anticipation of this continued growth. Additionally, land owners are aggressively marketing to large-scale enterprise data center deals, which should also contribute to growing activity in the market.

4 PRIMARY MARKET DALLAS/FORT WORTH DALLAS/FORT WORTH WHOLESALE COLOCATION MARKET GROWTH % 18.0% 18% Dallas/Fort Worth % 16.3% % 14% NOTABLE MARKET ACTIVITY: Aligned Data Centers: 2800 Summit Rd, Plano TX. Currently under construction with 12 MW set to deliver in November, 2015 and another 18 MW planned. Infomart Data Centers: 1950 N. Stemmons, Dallas, TX. 3 MW commissioned June, 2015 and another 20 MW planned. Critical Power (MW) % % % 10% 8% 6% 4% 2% 0 Q Q Q Q Q Q Total Market Inventory (MW) Total Net Absorption (MW) Market Vacancy Rate (%) Source: CBRE Data Center Solutions, Q %

5 EMERGING MARKET JACKSONVILLE Forbes continually ranks Jacksonville in its Top Ten for information technology jobs. Jacksonville Jacksonville is becoming a cable landing destination as new submarine fiber cables from Latin America are coming ashore. At 875 square miles, Jacksonville is the largest city by land mass in the continental U.S. Along with approximately 1.5 million residents in the region, Jacksonville is home to three Fortune 500 Headquarters (CSX, Fidelity National Financial and Black Night Financial Services) and more Fortune 1000 Headquarters (including Bi Lo, Crowley, EverBank, Florida Blue and Vistakon) than any Florida city. Forbes continually ranks Jacksonville in its Top Ten for information technology jobs. Including the Mayo Clinic, over 16% of the area s work force is employed in health care and the biosciences. Both Deutsche Bank and Merrill Lynch continue to grow their Jacksonville campuses into major financial centers. Finally, Jacksonville enjoys the benefits of the third largest Naval presence in the U.S. Navy and the distinction of being the Navy s most requested last duty station, thereby ensuring an ample supply of educated and tech savvy talent for Jacksonville s emerging data center and connectivity presence. Jacksonville is not only the gateway to Florida, now the third most populated state, but Jacksonville is quickly emerging as the newest network access point (NAP ) connecting to Latin America. The newly constructed cable landing stations for submarine cables Pacific Caribbean Cable Systems (PCCS ) and America Movil Submarine Cable System 1 (AMX 1 ), enhance Jacksonville s existing robust fiber connectivity evidenced by the intersection of fiber rich corridors along three railroads (CSX, Norfolk Southern and Florida East Coast), two interstates (Interstates 95 and 10) and U.S. Highway 1. While Miami and the NAP of the Americas has historically been the traditional connection point to Latin America, Jacksonville has emerged over the past few years as a preferred option due to three distinct advantages: Reduced Risk Reduced Latency Lower Cost Jacksonville enjoys the geographic advantage of being the western most city on the East Coast and has the same longitude as Cleveland, Ohio. Due largely to the re curvature effect, NOAA cites Jacksonville s risk as five times less likely to experience a hurricane than Miami.

6 EMERGING MARKET JACKSONVILLE (CONTINUED) Jacksonville NOTABLE MARKET ACTIVITY: EdgeConneX recently purchased a 42,000 square foot building and commissioned 1.6 MW of high density power with quick scalability to 3.2 MW. 421 West Church Street, located in Downtown Jacksonville, continues to grow connectivity by housing the JAX NAP, JAX IX Cologix (JAX1) and Go Rack. AMX 1 and PCCS cable landing stations are now operational, offering the newest gateway to Brazil, Central and South America and the Caribbean. Cologix is completing $20 Million of capital improvements to their two Jacksonville facilities (JAX1 and JAX2). In 2014, Cologix purchased a local colocation provider (CoLo5) at 4800 Spring Park Road, including a 105,000 square foot colocation facility in Lakeland, Florida. As the Internet of Things (IOT ) continues explosive growth, locating close to the edge of the Internet for reduced latency is of growing importance to content providers and CDN s seeking quality customer experiences and enhanced connectivity. EdgeConneX s Edge Data Center opening in Jacksonville serves as a recent example. Connecting to Latin America out of Jacksonville instead of Miami not only saves 350 terrestrial miles, but the reduced latency and greater capacity of PCCS and AMX 1 is assured by their $2 billion investment into 100 Gbps speed and cutting edge technology. Jacksonville s growing population and their soaring Internet content consumption, positioned them as an ideal location for a new edge of the Internet to be created. Our Edge Data Center significantly enhances the area s Internet performance and end user experience, as it is a new peering destination, remarks Clint Heiden, Chief Commercial Officer at EdgeConneX. Finally, Telegeography, a monitor of Internet traffic, cites Miami as having the highest cross connect fees of any major market. Jacksonville offers reduced connectivity and colocation costs along with a 12% reduction in the cost of living compared to Miami. At present, the Jacksonville colocation market consists of five primary colocation data centers delivering approximately 15 MW over approximately 126,000 raised floor square feet. Three of the existing data centers are purpose built including two former bank enterprise data centers and CoLoCSX continuing as the enterprise data center for CSX Railroad. While present market vacancy is estimated at 7.4 MW, Jacksonville s emergence as a growing connectivity point should increase colocation demand locally and from out of the region. As for pricing, Jacksonville largely remains a traditional per square foot per month plus electric or all in per square foot model, ranging from $24.00 to $ per square foot per month plus electric. However, with the recent entry of EdgeConneX, their wholesale metered power approach should prove attractive to customers seeking cost effective colocation solutions. Utility power is supplied by Jacksonville Electric Authority (JEA ), a community owned tariff rated utility at approximately $0.105 per kwh. Economic incentives from JEA for large commercial customers are potentially available. Allied Fiber recently completed their southeastern network between Miami, Jacksonville and Atlanta.

7 Patrick Lynch Managing Director th Street, Suite 2950 Denver, CO T [email protected] Jeremy Meyers Business Development Analyst th Street, Suite 2950 Denver, CO [email protected] ABOUT THE CBRE has the world s only fully integrated data center real estate team, offering strategy, acquisition and disposition representation, project management and facilities management from a single provider. Our Data Center Solutions has experience in primary, secondary and tertiary mission critical markets across the globe. We have the tools and knowledge to make your project successful regardless of location. With over 100 data center acquisition/ disposition specialists, 4,200 engineers, and over 300 project managers in over 75 global markets, CBRE has the global reach, resources, expertise and relationships to provide our clients with end-to-end market analysis, planning, construction, operations, maintenance, and execution capabilities. The DCS completed over 210 MW of transactions globally in 2014, has managed over 2.5 MSF of projects over the last five years, and has over 450 Tier I to Tier IV data centers under management. CBRE GLOBAL RESEARCH AND CONSULTING Jessica Ostermick Director, Research and Analysis 8390 East Crescent Parkway, Suite 300 Greenwood Village, CO T [email protected]