Atlanta Data Center Activity Poised For Takeoff In 2018

Atlanta first came on DataBank's radar in 2016. While the market was one of the largest data center clusters in the U.S., activity was relatively subdued. But Dallas-based DataBank's CEO, Raul Martynek, saw that dynamic poised to change.

“It kind of had all the ingredients to be an attractive market,” Martynek said.

Later that year, DataBank struck a deal to develop and operate a 90K SF data center connected to Portman Holdings' Coda project in the heart of Midtown. And it came with a customer in tow, too, with Georgia Tech taking 25% of its 8.8 megawatt capacity.

“It's extremely attractive for a data center developer … who spends the vast amounts of money, to not do it on spec,” he said.

DataBank is just the latest in a surge of new data center growth and activity that has some experts saying 2018 will be a strong year for the metro area. Already in the past year, Las Vegas-based Switch announced plans for a 1M SF data center campus in Douglas County, just west of Atlanta. Facebook could be readying a massive, $40B+ data center campus 30 miles east of Atlanta. Both Amazon and Microsoft also are scouting the area for data center locations, the Atlanta Business Chronicle reported.

“I think Atlanta sat idle for so long,” JLL Managing Director Leigh Martin said. “But it's a good wave coming through now.”

Martin said one big shift has been the mass adoption of using the cloud by corporate America; companies are storing key software programs and records outside their offices and in third-party facilities.

“Cloud leasing continued to reign supreme in the majority of markets,” JLL officials said in their 2018 data center outlook report.

These hyper-scale data center users like Facebook are starting to pick up their activity in Atlanta. But it has been bread-and-butter data center usage that is really keeping the metro area healthy. According to the JLL report, 35% of the 12.5 megawatts leased by companies in 2017 were for cloud operations. And data center providers are developing another 7 megawatts of power into this year.

“Several new co-location options will come to market over the next 24 months,” JLL officials said in the report.

CBRE Senior Vice President Tim Huffman said Georgia's low energy costs are finally catching data center operators' attention. The state's average industrial power rate is around 5 cents per kilowatt hour, half the national average. And if a company is willing to purchase power in advance, that can shrink to less than 4 cents a kilowatt-hour, according to the Business Chronicle.

Huffman said every penny — or even half penny — a data center operator can save becomes a huge multiple over time. There are few places in the U.S. offering Georgia prices.

“At 3.5 cents, that's almost like the Pacific Northwest,” he said.

For many years, Atlanta's data center market had been overshadowed by Northern Virginia and South Florida, Compass Datacenters President Jared Day said. But that is shifting as the average consumer uses more and more data for personal reasons.

"When you consider that the goal of content providers like Netflix and Amazon ... dictate[s] building data centers in closer proximity to areas with large volumes of consumers of the data that they provide, you can see how Atlanta is becoming a very attractive data center market,” Day said in an email to Bisnow.

Both Martin and Huffman said there are still plenty of companies operating their own data centers within their own buildings. But that is shifting as they get comfortable with outside providers storing their data, which will feed a lot of business to data center providers this year.

“You still have a lot of servers in office buildings,” Martin said. "They have not come out. And they will come out."

While DataBank has no specific plans for a second data center in Atlanta, that may not be the case for long, Martynek said.

“It does feel like Atlanta is poised to become a more significant data center market,” he said.

Hear more from Martynek, Day and Huffman at Bisnow's Data Center Investment Conference & Expo Southeast, Feb. 27 at the American Cancer Society Center in Downtown Atlanta.