Google Seeking Colocation Space (Part 2)

Google is staffing up to acquire existing colocation space and perhaps even entire data centers, even as it continues building.

Rich Miller

March 6, 2008

2 Min Read
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Read Part 1: Could Google's growth be outstripping its construction? The company's data centers were the focus of interesting comments Monday from Alan Eustace, Google's Senior Vice President for Engineering & Research, who spoke at the Morgan Stanley Technology Conference in Dana Point, Calif. Eustace noted that Google is "one of the few companies that has end-to-end control of our data centers." He was then asked about the company's network capacity.

"We do not have excess data center capacity," Eustace said. "We use every machine we have. When a machine comes online, it is immediately turned over to desperate engineers."

That might explain Google's interest in existing colocation space. The strategic negotiator is tasked with finding "highly cost-effective solutions under the most favorable commercial and technical terms possible." Colocation prices have been rising in recent years, and that trend isn't expected to change.

An Opportunistic Buyer?

So how could Google acquire data center space cheaply? It may be hoping to expand its domestic data center network by acquiring projects that run short of either customers or cash. Analysts have expected that a flurry of new projects announced over the past 18 months would eventually meet the booming demand for premium space. But tight credit in the commercial real estate market has made it hard to find new financing, raising the prospect that some planned data center developments may not be able to start or finish construction.

Seem far-fetched? Perhaps. But keep in mind that Google was a savvy acquirer of data center space in the downturn of 2001-03, leasing large chunks of space in empty buildings immediately before or after a bankruptcy filing. Some history:

  • In 2001, as Exodus was sliding towards bankruptcy, Google leased an entire data center facility from Exodus, apparently at a gross annualized rent per square foot of just $4.50 per square foot.

  • In 2003, Google was the first tenant in a huge, empty data center that had just been bought in a bankruptcy auction for 20 percent of its construction cost.

Will those bargain opportunities be seen in the current recession? To learn more about the impact of the credit crunch on the data center industry, check out this week's Crunch Time series.

  • Credit May Limit Data Center Supply

  • The Incumbent Advantage

  • Wall Street May Buy, Not Build

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