Forging Data Center Demand in Untested Markets

Forging Data Center Demand in Untested Markets

The opportunity for data center development can present itself in unexpected places, writes Corey Welp of 1547 Critical Systems Realty. From the Pacific islands to the middle of nowhere USA, overlooked locations may offer the most thriving data center environment.

Corey Welp is the Managing Director at 1547 Critical Systems Realty.

Data center developers and operators must compete in crowded, thriving markets while expanding to meet and create demand in new locations. Striking the correct balance is a combination of strategic planning, market research, resource allocation, and a bit of intuition. However, the opportunity for data center development can present itself in unexpected places.

Whether in the Pacific islands, an underground bunker, a Norwegian fjord, or the middle of nowhere USA, overlooked locations can sometimes present thriving data center opportunities.

Identifying the Market

At 1547 we take a demand-driven approach. As these markets are not proven, that demand can come from many sources, not just an obvious number of software startups or enterprises that need hosting. Existing customers or tenants in another market might create demand for expansion, like a customer on the West Coast who needs a low latency connection to their new Asia office. Further, demand could be part of the zeitgeist—recent headlines about data privacy, for example, might drive the creation of more data centers deep in bunkers.

With a market pegged as a development opportunity, financial institutions and investors have to be convinced as well. Beyond performing research on projected market growth, data centers can leverage anchor tenants (partners, nearby service providers, or enterprises) and existing assets as built-in value. An attractive building or existing infrastructure is another form of implied demand.

Addressing Existing Infrastructure

If the data center site has an existing building (or other structure—some data centers are in mineshafts or old water storage tanks) it must be retrofitted to allow a drop ceiling, raised floor, air plenums, and other necessary features. There might need to be new walls put up to segment office space and white space. Security measures will likely need to be added, from video cameras to fencing to biometrics. If the location was chosen due to existing technology assets, like an onsite NOC or some existing white space, costs can be reduced.

We like to say, “The data will follow the fiber.” Rolling out high-speed fiber lines can be a significant expense at up to $10,000 per mile, but it is almost always well worth the investment. More data is coming online every day, to and from customers all over the world, facilitated by fiber connections. Once 1 gigabyte connections are in place, interested businesses will likely come running.

Executing in Untested Markets

Once the market has been identified and the building construction finished, with new cabinets installed and servers hooked up to the network, you have to deliver on your promises to investors and execute. Securing business is much easier with partnerships. As with any business, relationships are critical.

A local partner, whether they are bankrolling as a capital investor or a tenant in the data center, can go a long way to help fill white space. Acquisitions work if you have the money to spend and a solid company to purchase, but a partnership with a data center service provider can be easier to pull off. These boots on the ground have greater insight into local demand and requirements. They can also fill in around your core competencies, which as a developer may not include system architecture or administration.

Not every location is practical for data center development—there may not be fiber lines within a few hundred miles, construction costs may be astronomical, and so on. But in many cases, once you build it they will come, whether that means disaster recovery, primary infrastructure, or a “meet-me” point between two larger markets.

Industry Perspectives is a content channel at Data Center Knowledge highlighting thought leadership in the data center arena. See our guidelines and submission process for information on participating. View previously published Industry Perspectives in our Knowledge Library.

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