Data Centers Will Need To Follow The Internet As It Spreads To Everything
The Internet of Things is becoming a more dominant part of life every day, which will keep the demand for data centers not just constant, but growing.
Connectivity is a must-have for any company that sells a product or service that engages with the internet, which is a growing share of the entire economy. But the biggest data center users remain "content creators and distributors," as fifteenfortyseven Critical Systems Realty President John Bonczek called them, citing internet service providers as well as Netflix and its competitors as prime examples.
Bonczek and other panelists at Bisnow's Data Center Submarkets, Northeast event at fifteenforytseven's Orangeburg, New York, facility discussed how that demand means more data centers and more submarkets where data centers are viable. The Orangeburg facility, sitting near the border of Rockland County and New Jersey, is an exemplar.
“We’re sitting in a market here where you’re not in Manhattan, but it’s less than a millisecond round trip in terms of latency, and that’s well within the range that’s acceptable for [IoT devices],” Bonczek said.
For years, Northern Virginia has been the dominant submarket in the country, and perhaps the world, for data centers. The combination of the U.S. government and a generous program of tax incentives from the state of Virginia has ensured intense levels of demand, but many major companies have already built facilities there.
"One of the things content folk say to me is that, ‘I need another East Coast center that’s not in Virginia,’” Bonczek said.
Another crucial element of the economy that demands connectivity is businesses themselves. Companies with workers all over the world increasingly desire to connect those employees instantaneously, which means both speed and increased cloud storage.
The cloud is now such a popular concept that even some data center providers "have a dilemma" over what to build for a company's digital infrastructure, rather than merely being a passive receptacle for data, CSL Behring Business Technology Director Sachin Ohal said. Ohal cited a company he worked with that sank over $1B into developing a cloud storage platform, “but they have no freaking clue what to use it for.”
“Their top executive from the business side attended a cloud conference and said, ‘Hey, let’s have a cloud,’” Ohal said.
The best way to remain prudent in such an environment is to avoid building beyond for what you need right now, according to Verizon Wireless Senior Engineer Frank McCann.
“You can future-plan and future-pray, but you can’t future-proof,” McCann said.
Helping that strategy is the increasingly modular nature of data center building, which has drastically shortened delivery times. DPR Construction recently completed a 350K SF, 80-megawatt center in nine months, Northeast Mission Critical lead Brett Korn said.
All of these factors play into the Northeast region's hands, according to Turning Rock Partners Managing Partner Maggie Arvedlund. The ability to respond quickly to the rapidly growing needs of the world economy and the constant drive of content providers to deliver that content faster is likely to produce growth that the region hasn't seen in the last few years.
“I think we’re on the cusp of the next big wave of large data center deployment with [content providers'] need to distribute to the edge," Bonczek said.
In other real estate sectors, the development and investment cycle is a fact of life. But as with distribution centers and e-commerce, data centers exist outside of a cyclical environment because they are responding to an overarching global transformation.
“This industry isn’t going away, and the growth potential continues to be exponential," Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C. member Jeff Moerdler said. "Like with every industry, there’s going to be blips, but it will continue to be on an upward trend.”
