Digesting Data, Part Deuce
Far removed from seismic shifts and hurricanes, Chicago has finally entered the ring as a top market for data centers. The Midwestern plains are looking increasingly attractive to our coastal friends, we learned at Bisnow's second annual Data Center Boom event Tuesday.(Even trade: They let us come to the beach, we let them build a few data centers.)
The geeky thrills continued for the crowd of 325 at Trump International Hotel & Tower. On tap:local demand drivers, lack of supply, and the high barriers to entry in data center development. 2012 was an electrifying year for data, they say, and the megawatts have nowhere to go but up in 2013. (People won't suddenly stop emailing photos of cats.)
Data center behemoth Digital Realty is one of the largest owners and operators in Chicago (1.1M SF at 350 E Cermak). Director Donough Roche says the city is well positioned for an influx of data centers from the coasts, thanks to low latencies between NY and here and lots of fiber connection. For data development newbies, he advises hiring an experienced team and playing to your strengths and successes in other industries (same advice applies when we compete for Miss America). In the future, Donough sees users looking for more scalable and "cloudlike" data centers, enabling exponential growth beyond their company's walls.
Server Farm Realty CEO Avner Papouchado knows emotions run high in a data center deal. People are putting their most important information and infrastructure into their data center, and it takes trust, years, and a lot of cash before that decision is made. (It's like a marriage, or finding the right hair dresser.) Server Farm picked up $75M in financing last year to build out its new 450k SF data center at South Loop's 840 S Canal, and Avner knows this is no "if you build it, they will come" situation. Because there are so many diverse users with varying needs in Chicago, centers can no longer be one-size-fits-all: Developers need to plan subareas around unique users, tailoring everything from cooling structures to the coffee.
Using a spyglass from his brokerage tower, JLL managing director Matt Carolan has noticed one thing--we need more supply! Minus the efforts of Donough and Avner, it's been relatively short in Chicago, Matt tells us. Demand is out there, but few people have the capital and development chops to push new product to market. Another hurdle: lengthy negotiations between CIO, CFO, and real estate director on the merits of such a monumental investment. The data game is not a price game (because cost differential from one state to another is minimal and mostly tax related) and Chicago is ripe for a surge thanks to its stability and central location, he says.
As CIO for the City of Chicago, Brett Goldstein is looking to get out of the data center business and focus on innovation. He plans to outsource the city's data centers to experts in the field and bring high levels of virtualization and portability to Chicago's tech superhighway. With this smarter urban model, the city can use its information for data analysis and predictive analytics like Silicon Valley. Brett is migrating the city's email and desktop apps (for 30,000 people!) to the cloud, making Chicago the largest municipality to do so (and making him either the most popular or most hated man in Chicago). Did we mention Brett was an early OpenTable employee and Restaurant Week starts tomorrow? Hmm, who can help us get reservations?
London-based Norland Managed Services manages data centers, providing facilities maintenance and support services. GM Steve Manos has been around the block and knows that new spec development needs both steak and sizzle to attract an end user. What can you offer in terms of power, fiber, water or other incentives? It's also helpful to have something built that people can see and walk through, making that leap of faith easier and helping envision the data center of their dreams.
The user requirements and development panel was moderated by Quarles & Brady partner Michael Rechtin. A data center specialist, Michael spends about 35% of his professional time wading through data deals, which we know can be complex and emotionally charged pieces of paper (he keeps a digital Kleenex nearby). Michael says he is bullish on big data in Chicago and expects both supply and demand to pick up this year.
