With more and more businesses outsourcing their IT operations and the growing popularization of cloud computing, user demand for space in third-party, multi-tenant data centers is set to spike in the years ahead.
North American data center owners can expect their combined revenues to grow by 32 percent by 2016, to a total of $14.8 billion, according to 451 Research. Additionally, employment in the data processing and hosting services industry will increase by 17 percent over the next five years, IBISWorld predicts.
A Boom in Multi-Tenant Data Centers
Even with the rising demand, the vast majority of data center real estate markets in the United States, including Atlanta, are currently favorable for tenants and in shape to remain that way through the third quarter of next year, according to JLL’s recent 2014 Data Center Outlook. However, by late 2015 and early 2016, supply and demand will be such that rents will rise, spurring a round of new construction to keep pace with demand.
At that point, Atlanta in particular will likely be poised for a boom in third-party, multi-tenant data center development, in both the retail and wholesale categories (broadly speaking, among other differences, retail data centers offer tenants spaces ranging up to 5,000 square feet in size, while wholesale facilities offer spaces typically between 5,000 to more than 50,000 square feet). Metro Atlanta currently has about 1.5 million square feet of data center space, with 40,000 square feet under construction (currently under roof) and another 160,000 square feet planned.
The Atlanta metro area is appealing to data center owners and developers for a variety of reasons, including:
- Reasonable land costs and a low overall cost of doing business.
- Low natural disaster risks.
- Aggressive local and state government incentives.
- An abundance of telecommunications fiber. Atlanta is the main Southeast fiber hub with three Internet exchange points.
- Inexpensive and reliable power. Electricity rates in the metro area, currently in the 4.7 – 5.5 cents per kilowatt-hour range, remain very competitive nationally – about 20 percent below the national average. Georgia Power’s investment in a large nuclear power plant in Waynesboro, Georgia, will help ensure a clean and abundant supply of sustainable power in the future.
- The accessibility provided by Hartsfield-Jackson Atlanta International Airport. Eighty percent of the U.S. population lives within a direct two-hour flight of Atlanta. This convenience allows data center providers and customers from across the globe easy access to their sites and projects in the city.
- Widespread industry demand. Data center users in Atlanta are distributed fairly evenly among a range of growing industries: technology (30 percent), banking and financial services (30 percent), healthcare (25 percent) and telecom (15 percent).
Looking ahead, companies across Atlanta, the United States and the globe appear set to increase their reliance on third-party data center space. Moving away from in-house ownership and management of their own data centers allows firms to mitigate capital expenditures, eliminate resource-intensive maintenance responsibilities, reduce facility operating expenses, respond efficiently to rapid changes in data and equipment needs, access more extensive technical expertise, and free up financial resources to focus on value-generating business initiatives.
With the popularity of third-party data centers showing no signs of waning, and with the metro area’s array of development-friendly features, it’s easy to predict a significant wave of new data center construction in Atlanta in the coming years.
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