Report: US No Longer Lowest-Risk Country for Data Centers

European and Asian markets overtake US on global data center risk index

Yevgeniy Sverdlik

July 14, 2016

3 Min Read
Report: US No Longer Lowest-Risk Country for Data Centers
Hrauneyjafoss, Iceland’s third-largest power plant. (Photo by Landsvirkjun)

There are more data centers in the US than anywhere else, and until at least three years ago, building a data center in the US was less risky than building one in any other country. According to recent risk analysis of global data center locations by a real estate services firm, however, that’s no longer the case.

US ranks third in electricity costs, fifth in ease of doing business, 15th in available network bandwidth, and 36th in corporate tax environment. These and six other characteristics add up to US being the 10th least risky data center location today, according to the firm.

The same report, Cushman & Wakefield’s Data Centre Risk Index, put the country at the top of the list just three years ago. Since 2013, US has been overtaken by four Nordic countries, as well as Switzerland, UK, Canada, Singapore, and South Korea.

The index ranks countries based on 10 factors that have a bearing on the level of risk for building and operating data centers. Different factors affect a country’s overall ranking to different degrees. GDP per capita, for example, doesn’t have nearly the weight of the likelihood of natural disasters, and water availability isn’t as strong a factor as political stability, or energy security.

Considering all 10, Iceland is the safest data center location bet you can make, followed by Norway, Switzerland, Finland, and Sweden, filling out the top-five in that order. Canada ranks sixth, followed by Singapore, South Korea, and the UK.

The report looks at 37 countries Cushman considers either major or emerging data center markets. It’s based on a survey of thousands of data center operators around the world.

So, what is it about Iceland that makes it such a safe haven for data centers? According to the report, the country ranks high in availability of renewable energy and water, low risk of natural disasters, political stability, low energy costs, and corporate taxes. It’s also better than many others in terms of connectivity, ease of doing business, and GDP per capita. Iceland ranked 22nd in energy security, its lowest ranking among all categories.

Risk, of course, isn’t the only thing driving data center location decisions. It is one of several variables itself, the other variables being things like proximity to end users and the ability to improve customer experience. While there are data centers in Iceland, there are relatively few of them.

Proximity to users remains a huge consideration, but corporations are also increasingly concerned about political stability, risk of natural disasters, and energy security when weighing data center locations. All three have surpassed traditional considerations like cost and connectivity in priority, according to the report. Collectively, these three factors now account for one-third of the overall decision, “implying a level of emotional sentiment throughout the survey following a number of major incidents over the past few years.”

The latest example of such an “incident” happened just recently, months after the survey was conducted. It’s unclear whether the UK’s current ranking on the index (it’s in the ninth place) would be different had the report taken into account the country’s vote last month to exit the European Union.

In a statement, Cushman’s head of London markets, Digby Flower, said real estate occupiers in London with strategic plans “will move slowly,” following the Brexit referendum, referring to the real estate market in general. There are signs, however, that demand for data centers as a subcategory of the real estate sector is less affected by Brexit than the category as a whole.

Download the full report here

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