Vantage Data Centers has begun construction on an additional 6 megawatts of space at its Santa Clara, Calif. data center campus, the company said today. The new phase of construction is backed by a recent expansion of the company's credit facility from $135 million to $210 million.
Vantage, which develops wholesale data center space, entered the highly-competitive Silicon Valley market in early 2011, quickly leasing nearly 20 megawatts of power capacity. After competing aggressively for market share as it leased its first two buildings, Vantage has fine-tuned its approach to leasing its last and largest building in Santa Clara. The 6 megawatt first phase was completed earlier this year, with a large chunk of it now housing a data center for colocation provider Telx.
The additional borrowing power under its expanded credit facility will allow Vantage to build out an additional 6 megawatts of space, of which 3 megawatts is pre-leased, according to Vantage CEO Jim Trout. The final phase will offer up to 9 megawatts of space, which could either be leased to a single tenant or subdivided for multi-tenant use, Trout said.
"Momentum is Strong" in Silicon Valley
“Our momentum continues to be strong in Santa Clara, one of the world’s largest and most competitive data center markets," said Trout. "We see a combination of Internet companies and corporate enterprises working with our design, construction and operations teams to ensure that their data center reflects both their unique requirements and their strategic operating objectives."
Vantage's first building, a 6 megawatt retrofitted facility known as V3, is fully leased to four tenants, including Mozilla Corp. Vantage then leased its entire V2 data center to a single tenant in a 9-megawatt lease that is one of the largest wholesale data center transactions.
In February, Vantage tapped the debt market for $135 million from a lending group that includes Royal Bank of Canada, KeyBank, Bank of America, Barclays Bank, Raymond James Bank, FSB and UBS Loan Finance as participants.
"Retooling" in Competitive Market
Vantage’s success has gotten the attention of its neighbors in Santa Clara. DuPont Fabros Technology lowered its rental assumptions for its Santa Clara facility, citing competition from “private equity players.” Digital Realty Trust, QTS, Terremark/Verizon and CoreSite are also marketing space in Santa Clara.
Vantage insists its success in Silicon Valley isn’t solely about pricing, but also related to its tenant focus and, in the case of its leasing of the entire V2 building, the ability to customize the facility for a single tenant.
But after completing the first phase of its final building in Santa Clara, Vantage paused its development. The company has added new executives to its team, and worked closely with its financial backers, Silver Lake Partners, on refining its approach to the market.
"We took several quarters to retool," said Trout. "We said,' let's make sure we get everything right.' We're going to be serious about attacking the enterprise market."
Trout said he believes there will be enough demand in Santa Clara for all of the current market players to thrive. He says demand will remain strong as enterprise companies confront the limitations of older data center facilities. Newer cloud computing technologies, along with virtualization-driven consolidations, are resulting in higher-density racks that are difficult to manage in aging facilities.
"We're thinking about lifecycle data center consolidation," said Trout. "The demand drivers are stronger than we thought. Large cloud deployments are above forecast, and I think he'll continue to be a little forecast into 2015 and 2016."