Last week, Vantage Data Centers, which rents out large amounts of data center space to tech companies and cloud providers in Silicon Valley and Central Washington, suddenly brought an additional 12 MW of data center capacity to market in Silicon Valley. But it didn’t actually build a new 12 MW data center on its three-building Santa Clara campus.
The capacity was freed up by an existing customer that had overestimated its future data center needs when it signed a lease with Vantage. “The customer, in hindsight, purchased more capacity than they ultimately needed,” Vantage CEO Sureel Choksi said in a recent interview at the company’s offices in Santa Clara but declined to disclose who the customer was.
While 12 MW is a lot of capacity – typical wholesale deals range between 1 MW and 6 MW – it was welcome news for Vantage, which only had 3 MW available in the supply-constrained Silicon Valley data center market. While several providers are in the midst of construction to add capacity, few have big chunks of space that’s ready to go.
Supply of data center space in the Silicon Valley is at “historically low levels,” real estate brokers at Jones Lang La Salle wrote in a recent report on the North American data center market. Demand this year is higher than it was in 2014, and JLL anticipates supply constraints to persist because of both high demand and a tight real estate market.
Providers that can deliver “large contiguous space” will be able to rent it out at premium rates, the brokers wrote. This is good news for Vantage, since half of the capacity freed up by its customer is fully built-out and the other half is contiguous expansion space.
Not surprisingly, Silicon Valley’s booming tech industry is driving the demand the same way it’s driving demand for office space and housing in the region.
Cloud providers and enterprise software makers are driving demand for Vantage, Choksi said.
Both Infrastructure-as-a-Service and Software-as-a-Service cloud companies are shopping for data center capacity in the area.
As we reported earlier this year, Chinese internet and cloud services companies are contributing a significant portion of this demand. “Both domestic and Asian providers represent a big source of demand going forward,” Choksi said.
Alibaba, China’s answer to Amazon, launched two Silicon Valley data centers this year. It’s unclear which data center provider or providers Alibaba is using in California.
Server Farm Realty partnered with Chinese data center provider 21Vianet, which said it will use SFR’s data center space in Santa Clara to serve unspecified Chinese customers. Last year, CoreSite leased 3 MW of capacity in Santa Clara to China Telecom to serve an unnamed customer.
CoreSite also said earlier this year it was building a massive 140,000-square-foot data center in Santa Clara for a single customer whose name it did not disclose. In addition to the build-to-suit project, CoreSite is building a 230,000-square-foot multi-tenant facility, expecting to “substantially complete” the first phase in the second quarter.
Software companies comprise the other big category that’s driving demand in the Valley. “Enterprise software is a big driver of wholesale data center needs,” Choksi said.
Vantage’s recent wins include multi-megawatt deals with the security software giant Symantec, the enterprise Hadoop company Cloudera, and MarkLogic, an enterprise NoSQL database company. Another enterprise software company signed a multi-megawatt deal this year, but its name was not disclosed.
According to JLL, there was only about 14 MW of commissioned vacant data center capacity available in the Silicon Valley when its report was published earlier this month. The report came out before Vantage announced its 6 MW of commissioned capacity.
Choksi believes Vantage is the only provider that can provide that much capacity with contiguous expansion space in the market today, putting it in the position to benefit from those premium rates forecasted by JLL.