In Podcast 40, we continue our Data Center Fundamentals series and dive into the basics of data center location.

Why is the location of a data center important? We go through at all the reasons data center professionals need to know about the location of a data center.

Economics

Data centers are exponentially more expensive than other types of real estate, and the economic considerations have ramifications on all data center projects.

Power cost is one of the most important factors when choosing a data center location as it can constitute up to 20% of the total cost of colocation. The cost of power can vary widely from region to region. Areas like Quincy or Montreal are $0.02-0.03 per kilowatt-hour, while locations in the Northeast US can be up to $0.15-0.16/kWh.

For larger colocation providers and hyperscale companies who are building entire campuses, land availability and cost needs to be accounted for. In markets like Dallas and Phoenix, there is virtually unlimited land in every direction. In markets like Northern California, Northern Virginia, or Chicago, natural barriers like bodies of water or heightened demand make land acquisition more difficult.

The market’s climate can impact the cost as well. In cooler markets, you can use the cool air outside to cool servers instead of air conditioning units. This can help keep power consumption costs down. In warmer markets, summers can have higher power costs due to peaks in demand.

Most states offer tax incentives tailored to data center development in order to attract end-users. Larger data center investments can be eligible for tax credits based on the total development investment or receive exemptions from sales tax on equipment.

A market’s competitive landscape and demand profile also impact lease rates. Heavy competition and/or an oversupply in a market may lower the amount data center providers can charge. This is what we're seeing in the Dallas and Chicago data center markets right now. Conversely, a smaller number of operators or lower supply in a market can enable providers to charge a higher rate.

Hazards

A data center’s location can also be influenced by geographical hazards.

Natural hazards like earthquakes or hurricanes are important to consider when performing a site evaluation. Markets like Phoenix and Chicago are relatively safe from natural hazards. New Orleans and Orlando are examples of markets that have historically deterred data center development.

Even with natural hazards, some markets are so strategic that providers build there anyway. In order to do so, they may need to make a larger investment to beef up the building’s physical infrastructure.

For example, Northern California, Los Angeles, and Seattle are areas of high seismic risk but are also three areas of substantial data center investment. To account for natural hazards, data centers can be designed to absorb earthquake vibrations or withstand winds of 150+ mph.

Man-made hazards also have an influence on a data center’s location within a market. The proximity to railroads, highways, airports, and nuclear power plants are often considered when selecting a data center location.

The European data center industry is full of growth and change. The increased demand from COVID-19 and individual European countries are at the forefront of that growth. Hear what EdgeConneX CMO, Phillip Marangella, has to say about it.

This is an episode of HawkTalk, datacenterHawk’s series of candid one on one conversations with executives and leaders in the data center industry. If you enjoyed this episode, you can check them all out on our blog. If you’d like to know when we release future episodes, you can subscribe here.

Below are some of our takeaways from the discussion.

COVID-19 increased data center demand as traffic moved from offices to homes

The COVID pandemic caused major shifts in the world. Many industries are hurting due to these shifts, but the data center industry has seen an increase in demand.

People are home more now than they were a year ago. Whether they’re working from home, streaming tv shows, playing online video games, or anything else that requires an internet connection, homes are becoming the new edge in the data center industry.

Opportunities are rising in secondary EU markets

Building data centers in Europe can come with challenges like planning for long term scalable power. You need to be able to meet all of your customer's requirements as they continue to grow.

Customer needs today are not what they will be in 5-10 years. Planning for expansion to meet needs in the future can be difficult to balance against the costs of building beyond the needs of today.

There are still a lot of opportunities in the FLAPD (Frankfurt, London, Amsterdam, Paris, & Dublin) markets, but at the same time, there are a number of secondary markets that are beginning to have needs for data centers. That’s why EdgeConneX decided to build in Warsaw & Munich and are continuing to track markets outside of the FLAPD markets.

Expansion into APAC

The APAC data center market is a rapidly growing part of the global data center industry and one that EdgeConnex is tracking for future expansion.

Expansion into the APAC market requires smart strategic planning and is quite a different task than building in either North America or Europe. A good partner in Asia to help navigate the opportunities there is key to success.

We'll continue to track EdgeConneX as they grow and expand into new markets.

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This is an episode of HawkPodcast, datacenterHawk’s viewpoints on the data center industry. If you enjoyed this episode, you can check them all out on our blog. If you’d like to know when we release future episodes, please subscribe.

The main takeaways from 4Q 2020

2020 ended up being a year filled with events that no one expected. These unexpected challenges led to record demand in the data center industry.

The fourth quarter wrapped up one of the largest growth years for the industry. Five of the top ten markets in North America (Dallas, Phoenix, Northern California, Northern Virginia, Northern New Jersey) had their largest growth year since datacenterHawk began tracking them.

Two other top ten markets (Atlanta, Chicago) had their second best year ever and it came close to their best.

Growth in Frankfurt and other European markets

The Frankfurt data center market has taken a front seat it comes to the growth in the European markets for a few reasons. While London is still the largest market, Frankfurt has outpaced London’s growth in recent quarters.

Frankfurt’s growth is due to its maturity as a market, its high degree of connectivity and the ability for developers to secure land and power. Market maturity means there are enough companies who have an established footprint in a geography that new entrants are more willing to grow their based on the experience of others who have gone before them.

As connectivity becomes a larger factor in making colocation decisions, the fact that Frankfurt is highly connected adds to the appeal.

Finally, developers in Frankfurt -and Germany as a whole- have been able to procure land and power more quickly than in other European markets. This “speed-to-market” ability is an advantage when it comes to landing large data center requirements.

It’s not that the other major European markets aren’t growing, it’s that data center providers have put a lot of their focus in Frankfurt and have shown others how they can grow there.

Amidst growth, rates have gone down

Over the past 5-10 years, the data center industry has experienced increased demand all over the world, and yet we’ve seen a compression of rates. This is counterintuitive in the real estate world, but when you look at it over time, it makes sense.

We’re still in a young stage of the data center industry. 10 years ago, rates were higher because there may have only been one or two data center providers in a market, which meant there was little to no competition. Increased presence in major markets by multiple operators has resulted in lower rates.

Another reason for the lower rates is that the product has continued to become more efficient, which has driven costs (and the associated rental rates) down. As innovations continue and providers incorporate customer feedback so they are not developing unwanted facility features, rates will continue to compress.

Don’t forget to check out the rest of our HawkPodcasts and don’t miss out on our latest release of market data for the data center industry.

We take a moment to review some of the questions our listeners have asked about the data center industry.

Below are some of the topics and questions we cover in the above video.

This is an episode of HawkPodcast, datacenterHawk’s viewpoints on the data center industry. If you enjoyed this episode, you can check them all out on our blog. If you’d like to know when we release future episodes, you can subscribe to our channel.

0:00 - Intro

1:20 - Pros and cons of floating data centers.

4:51 - How increasing rack density is changing data center development and sales.

7:35 - Microsoft’s recent announcement of 3 cloud data centers in Athens, Greece.

8:53 - Data center staffing from an IT standpoint.

10:55 - What is the advantage of doing business with a smaller data center (1-5MW) than big players with a 20-100MW+ capacity? How do smaller data centers attract big customers in order to grow?

13:11 - What is the breakdown between public/private companies with leasing? What is the main differentiator between public and private companies?

Thank you for watching this video and you have a question about the data center industry, don’t hesitate to reach out to us! You can comment on any of our YouTube videos, message us on LinkedIn (https://www.linkedin.com/company/datacenterhawk), or email us directly at

[email protected].

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Edge data centers continue to expand in Los Angeles as companies seek to keep latency low for their most demanding media customers

This is an episode of HawkTalk, datacenterHawk’s series of candid one on one conversations with executives and leaders in the data center industry. If you enjoyed this episode, you can check them all out on our blog. If you’d like to know when we release future episodes, you can subscribe here.

Maile Kaiser took some time to sit down with us to discuss the Los Angeles data center market and how the data center industry has changed over time.

Below are some of our takeaways from the discussion.

The growth of the Los Angeles market

While the Los Angeles data center market isn’t one of the largest in the US, it has grown over the past few years.

It’s been viewed as a market for edge data centers and a strategic location for customers who need to have their data close to their end-users. But an increase in innovations in the digital technology industry has caused a rise in the need for edge compute, which is part of the reason for the growth in the market.

The future of The Los Angeles market

Across the data center industry, more companies are going digital than before due to covid - driving the need for more data centers.

These companies are seeing technology advance and want to take the opportunity to mature their digital footprints and connect more with their users. 

The Los Angeles market has become an area with more edge growth, and with a population of over 10 million people, Maile predicts that reducing latency will continue to be a critical goal for application providers moving forward.

Data center industry growth

Typically the data center industry has almost been invisible to the wider population. It would work in the background and give access to the applications and tools that everyone uses on a daily basis without anyone knowing that they’re utilizing a data center.

The pandemic seems to have brought more visibility to our industry. Technology stepped in to support people’s everyday needs from work to healthcare to education, with data centers being a massive component to supporting these needs.

Overall COVID-19 has caused more growth and attention on the data center industry and made larger edge markets, like Los Angeles, more important than ever for faster speeds.

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If you’re short on time, below are some of our thoughts from the above video.

2021 Overview

Based on the conversations we at datacenterHawk have had with people in the data center industry, we feel as though 2021 will be a solid year for the market.

Ultimately a lot of the growth will depend on larger hyperscale deals being completed, but those companies are looking to add to their footprint all across Northern America and the world.

The hyperscale companies that are going to be responsible for the majority of the growth in the industry are looking for flexible deals with data center operators. It’s not just about turn-key capacity anymore. Powered shell and build-to-suit developments are becoming more common.

We feel confident that the demand seen in 2020 will continue at least through the first half of 2021. The persistence of the impact of COVID19 as well as the continued growth of secular tailwinds already in place pre-COVID may drive demand through the entirety of 2021.

Enterprise demand in 2021

In 2020, enterprise demand was a bit on the lower end than we expected. We think that it will increase in 2021 from where it was in 2020.

Many companies delayed IT projects to focus on supporting their employees as they began to work from home. Additionally, financial constraints further constrained directors ability to get funds for IT projects.

We believe that even if the COVID pandemic is not fully solved, it has at least stabilized such that these companies will look to reboot in 2021 and start working on previously-shelved IT projects.

How will the edge grow in 2021

In 2020 we saw edge-focused partnerships between large data center operators and smaller companies, such as Flexential and American Tower, Digital Realty and Vapor IO, Switch and FedEx. While the edge is still very nascent, these partnerships point to the increasing focus it is becoming among large, traditionally core data center operators.

These companies believe there will be a more spread out infrastructure approach with higher demand moving forward. We see these data center operators are positioning themselves to handle that demand when it comes. Expect additional operators to enhance their edge capabilities through new product development or acquisition in 2021.

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DATA4 Group CEO, Olivier Micheli shares how they develop and expand into new markets, even in light of recent trends.

This is an episode of HawkTalk, datacenterHawk’s series of candid one on one conversations with executives and leaders in the data center industry. If you enjoyed this episode, you can check them all out on our blog. If you’d like to know when we release future episodes, you can subscribe here.

DATA4 Group was founded in 2006 and has been a key player in the Paris and French data center markets ever since. After becoming a top data center provider in France, they decided to expand their circle to other European nations. Their CEO, Olivier Micheli, sits down with our lead European analyst to discuss the company and the markets that they’re in.

Below are some of our takeaways from the discussion.

Growth of the Paris data center market

One of the main drivers for the growth in the Paris data center market has been the hyperscale users.

Larger users to want to grow in Paris because is there is some catch up happening. Recently other major markets in Europe, namely London, Amsterdam, & Frankfurt, have seen dynamic growth and the hyperscale users see Paris as a market with the same amount of opportunity as those.

Developing in Italy, Spain, and Luxembourg

Data4 Group has their eyes on expanding to new markets, but they prefer to follow a strategic path and be strong in the markets they’re in before expanding to new areas.

This is how they went about their expansion out of Paris. They stayed focused with a goal to become very strong in that market before moving to Italy, Spain, and Luxembourg.

Now that they’re in those markets, they want to stay focused in those areas until they are able to build a strong foundation before moving to their next markets.

Looking towards Frankfurt

Micheli talks about DATA4 Group’s history and their strategy for getting into the markets they’re in now, but he also mentions their future and where the company wants to go moving forward.

Frankfurt is one market that’s currently on their radar for its large stable economy and massive connectivity.

But they want to follow the same expansion strategy they did the first time around focusing on becoming a top data center provider in their current markets before moving into new markets.

It will be interesting to follow DATA4 Group as they continue to grow and we at datacenterHawk look forward to tracking with them and other providers in the European markets.

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David Dunn, COO of H5 Data Centers, shares how they think about evaluating smaller markets and developing the next generation of talent for the data center industry.

H5 Data Centers has a unique focus on edge data centers and bringing data to people rather than focusing so strongly on where the largest supply and demand is happening in the data center industry.

COO, David Dunn sits down with datacenterHawk to discuss this strategy and the future of the industry.

Below are some of our takeaways from the discussion.

H5’s big focus on smaller markets

A lot of data center providers follow the strategy of finding land to buy in a major market and building a big brand new data center campus from the ground up. H5 takes somewhat of a different approach in their strategy.

H5 has increased their focus on smaller data center markets such as Albuquerque, San Antonio, and Cleveland. While still having a presence in some of the larger markets, H5 takes pride in trying to find the markets that have untapped potential and growing in those areas.

H5’s approach to evaluating new markets

While knowing the supply and demand of the data center markets is important and can be a main way to make decisions in the industry, H5 also looks at the population sizes of markets and the distance between two major cities to determine whether they want to be in a market.

For example, Albuquerque is a city with a decent population size, but it’s also hundreds of miles away from the next city that’s comparable in size. This tells H5 that there are people in that area who will need and want to use data, and likely don’t want to store it hundreds of miles away.

Developing the next generation of data center professionals

H5 takes a lot of pride in doing their part to move the industry forward. One way they do this is by helping educate the next generation about IT needs and the data center industry.

They have made it a point to be involved in the STEM programs of local schools. They want to help create the future jobs in the industry and give kids who might not have had an opportunity to learn about the data center industry a chance and mentor them.

datacenterHawk will continue to follow H5 Data Centers as they continue to on their paths of growth and we look forward to seeing the next steps that they take in the industry.

The Frankfurt data center market is active and poised for growth. Equinix is in a position to be a big part of the growth in the market.

This is an episode of HawkTalk, datacenterHawk’s series of candid one on one conversations with executives and leaders in the data center industry. If you enjoyed this episode, you can check them all out on our blog. If you’d like to know when we release future episodes, please consider subscribing to our channel.

Dan Scarbrough, Lead European Analyst at datacenterHawk, got the chance to sit down with Michael Winterson, the VP of Business Development-EMEA & Jen-Peter Feidner, Managing Director Germany at Equinix to discuss the Frankfurt data center market and Europe as a whole.

Below are some of our take aways from the discussion.

How COVID has changed business as a whole

COVID has changed so much in our world from a business standpoint. In the above video, Michael explains that the biggest issue for Equinix and their customers is how difficult it has been to transition to a socially distanced world.

Before the pandemic, Equinix had about 2,000 visitors per day across all their facilities. when the pandemic hit, they severely limited the number of people that could come into their facilities to avoid locking down any of their locations. Michael and the Equinix team are grateful for their customers who adjusted to these new security measures, including having all appointments scheduled and booked in advance.

The other major change that Equinix noticed related to COVID was the need to rapidly shift network. Networks have had to adapt quickly to the demand that was produced when so many people shifted to working from home and utilizing virtual meetings.

The trend of Asian capacity coming to the Frankfurt market

Equinix has seen a good amount of interest and deployment from Asian data center users in the Frankfurt market. These users not only are coming to Equinix but also building their own smaller footprints in the Frankfurt market.

Germany is a Central European country and has good commercial relationships beyond the digital industry. Specifically in manufacturing and importing and export. country and that there are good commercial relationships beyond the digital industry. These relationships, alongside the access to the digital industry is a big reason for Asian data center users to enter the Frankfurt market.

New entrants and demand growth in the Frankfurt market

There is a surge of demand growth in the European markets right now and specifically in Frankfurt.

As Jens-Peter Feidner puts it in the above video, “People wouldn’t enter a market if there’s not enough demand. Everyone looks at where to invest the dollars. Even if money might be cheap and it’s a good industry to invest, you still don’t want to lose money. So that proves that there’s enough demand.”

Feidner goes on to say that Equinix and other data center providers who have been in the Frankfurt market for a long time, benefit because they have the name, brand, and service that prove they have been able to deliver quality to their clients in the past. The newer entrants in the market have yet to gain that same level of credibility.

Frankfurt is a data center market to keep your eye on moving forward so be sure to stay tuned to datacenterHawk for more up to date content on it and other major US and European markets.

The data center industry can be complicated to get a grasp on. Part of the reason for that are the terms and lingo. So in podcast 36 we thought it would be helpful to decipher some of the common terms that are used in the data center industry.

This is an episode of HawkPodcast, datacenterHawk’s viewpoints on the data center industry. If you enjoyed this episode, you can check them all out on our blog. If you’d like to know when we release future episodes, you can subscribe here.

Below are the terms we go over in the podcast above.

kW (kilowatt & megawatt) - These are the units of power measurement that leases in the data center industry are measured in. They refer to how much power capacity your IT infrastructure has access to.

Gross + E - A type of lease and also a simple equation for how much it will cost you to be in a data center. “Gross” stands for having the right to access the power infrastructure and “E” stands for the actual power that you utilize.

Triple Net Lease “NNN” - This is a different type of lease from the

“Gross + E” that we mentioned above. A “Triple Net Lease” is mainly reserved for larger companies who will take care of some of the building operating costs that are usually provided by the data center operator themselves.

Carrier Neutral Facility - A facility that offers multiple fiber providers instead of just one. Almost all multi-tenant data centers today are carrier-neutral facilities.

Ping, Power, & Pipe - This is a phrase for referring to the basic components of a data center colocation lease. It is another way of referring to power, space, and cooling.

Managed Services - Any service that a data center provider will offer in addition to power, space, and cooling, for example, firewall management, remote hands or rack and stack.

Rack & Stack - Another example of a managed service where the provider will assemble your hardware for you in their facility.

Purpose-Built / Retrofit - These are the two different types of data center construction. Purpose-built means the reason a facility is being built is to be a data center. Retrofit means that a building was not originally meant to be a data center, but has been renovated and changed to be one, likely because it’s in a good location with good power and connectivity.

Absorption - This is the word that the data center industry uses to measure demand/growth in a given time period.

Dark Fiber - A dedicated fiber route between one facility and another. Dark fiber is typically used by a single customer as opposed to shared. Since it is a dedicated resource, it will be more expensive than lit fiber.

Lit Fiber - A fiber route that goes directly into a facility is considered “on net” or “lit”. Data centers will typically have multiple fiber providers entering their facility. Lit fiber is a shared resource.

PUE - Stands for Power Usage Effectiveness. This is a metric that data center facilities will use to measure the efficiency of their design. It measures how much of the power that comes into a facility is used by things other than the data center space (e.g. office space).

Compliance Acronyms (ISO, PCI, SOC1, FEDRAMP, etc) - Compliance is a very important aspect of the data center industry. This has grown in importance due to data breaches and other security issues. There is a long list of acronyms that can be categorized under the compliance umbrella, but the jest of what you need to know is that there are dedicated teams in the data center industry that need to know what all of these acronyms stand for and the specifics of them.

Thanks for listening to this podcast, we hope you’ve found this information to be helpful. If you did, it would help us a ton if you would like, share, and subscribe to our content.