The Texas Data Center Phenomenon

Texas has become a data center hot spot. Here's a look at the state's data center map and recent developments for Austin, San Antonio, Dallas, Houston and El Paso.

The state of Texas has been a major player in the data center boom. The first wave of growth was driven by the success of the state's many dedicated hosting companies, including The Planet, EV1Servers, Rackspace, C I Host, SoftLayer, Layered Technologies and VeriCenter, among others. In the past several years, Texas has become the hot spot for stand-alone enterprise data centers attracted by the fact that the state had its own power grid and cheaper electricity than other major Internet markets.

The growth has established a number of Texas cities as destinations for data center site location, which in some cases are now battling one another for new projects. Here's a look at the Texas data center map and recent developments for Austin, San Antonio, Dallas, Houston and El Paso.

The early growth of the Telecom Corridor in Richardson helped put the Dallas market on the map for data center development. Around the same time, the Infomart was evolving into a major carrier hotel. The city has also benefited from the growth of a vibrant crop of web hosting companies, including The Planet, C I Host, DataSide (Collocation Solutions), SoftLayer, Layered Technologies and Colo4Dallas.

While Dallas is the most mature of the state's data center markets, it continues to attract new projects, including a planned 1 million square foot data center campus in Richardson by Skyrise Properties, which also recently bought a Ft. Worth data center from Hillwood Development Company. Behringer Harvard recently bought a facility in Arlington.

The capital city snared one of the largest enterprise data center projects when Citigroup chose Austin for a $450 million facility in Georgetown. It is the latest in a series of corporate stand-alone data center projects the region has attracted. Hewlett-Packard is building two major facilities in Austin, while Lowe's has a $126 million data center in the works. That's in addition to Zydeco Development's proposed data center park and plans by Digital Realty Trust to expand its Austin facility.

Microsoft's decision to build a $550 million data center in the Westover Hills area has been followed by announcements of data center projects by the NSA, Stream Realty and Christus Health. The San Antonio Economic Development Foundation said it is working with five other companies looking at San Antonio for new data center sites, including some speculative projects. One new project is driven by the growth of a local success story: Rackspace Managed Hosting will invest $100 million to convert a vacant San Antonio shopping mall into its headquarters, and plans to add 4,000 new employees over the next five years.

Houston means Big Oil, and many local IT providers have sprung up to support the industry's needs. But Houston was also home to one of the dedicated hosting industry's juggernauts. EV1Servers (Rackshack) was founded as a spinoff of local ISP Everyone's Internet, and the popularity of its $99 servers made it one of the biggest hosting companies in the world by 2003. The market for new data centers in Houston has been relatively quiet since EV1Servers was acquired by The Planet/GI Partners in May 2006. But things heated up in July, when two managed hosting providers based in Houston were bought in separate deals. Vericenter was acquired by Sungard, one of the largest players in the disaster recovery business, while managed hosting specialist Cyrus One was bought by ABRY Partners, a private equity firm that invests in communications industry.

With these other Texas cities all attracting data center projects, El Paso wants to get in on the act. The El Paso Regional Economic Development Corp. (REDCo) has begun promoting El Paso as a destination for data center developments, hoping to attract investment and high-tech jobs. REDco president Bob Cook said his group launched an initiative in January to make industrial recruiters aware of El Paso's attributes for data centers. Since then, Cook says REDCo has received calls from two consultants and a company searching for data center sites, he said.