Philly's Suburbs Are Benefiting From The Data Center Push For Location

The prevalence of cloud technology has made data storage and computing seem untethered to location, but as data center real estate executives will tell you, location is more important than ever.

While massive server farms and data centers remain concentrated in key areas, what speakers at Bisnow's Philadelphia Data Centers event referred to as Tier 2 and Tier 3 markets have gained value as companies place increased priority on content distribution networks, and the edge servers that mark their farthest reaches. 

In order for companies to maximize their speed, they need servers as close as possible to where data is actually used. Those close to the businesses accessing the network are called edge servers, and they are to the data center industry what last-mile centers are to distribution and logistics: a crucial competitive edge in delivery speed.

“A lot of [real estate activity] is being driven by content being closer and closer to the edge," zColo by Zayo Vice President of Sales Stephen Finnerty said. "There’s an insatiable demand for bandwidth.”

Technological advancement is constantly accelerating, and requirements for data rapidly change. To adapt to the need for increased capability close to companies' headquarters, many businesses have decided against continually upgrading internal servers and instead have outsourced to the cloud — and the data center operators that provide access to it.

“For the past 10 or 12 years, the adoption rate of outsourcing IT at the data center level and cloud services has continued to accelerate in this market,” TierPoint Strategic Business Operations Vice President Bob Hicks said. “Some of the larger entities adopted early, and now it’s trickling down into smaller enterprises. So we’re being driven to build more space, add more services, and build larger clouds, both private and public.”

Third-party data centers in Philly's central business district have not benefited from this movement as much as one might think. Space remains available at 401 North Broad St. and 1309 Noble St., which has led Real Property Solutions owner and President John Smyth to conclude, "We don't do a good enough job as an industry."

“We still have too much space in Center City," Smyth said. "Philly just doesn’t have the amount of corporate headquarters that comparable cities do.”

But the data center market has gained significant excitement in the greater Philly region.

“We did extensive research over the past 24 months to decide that [Philadelphia] was the right market for us," Peak 10 + Via West Vice President of Enterprise Sales Allen Skipper said. "Downtown seems to be fairly well-supported by data centers, but as we start to look at the outer rings, there’s a ton of activity in terms of enterprise consolidation.”

Multiple speakers mentioned Collegeville as a target for data centers. Peak 10 + Via West has a facility there, and has been fighting to expand and keep up with demand.

“The time between builds has collapsed and condensed a lot, we just have to build more rooms in eight months rather than 12," Skipper said. "We can’t get out of the construction cycle at this point.”

A pendulum swing slightly away from total dependence on cloud technology has been driving demand. Amazon Web Services has provided easy scalability for companies, but the ease of growth is offset by huge increases in cost, like an addictive smartphone game that can drain a consumer's wallet with in-app purchases.

Finnerty called the over-caffeinated expansion a form of "digital sprawl," and said the attendant price increases are "making people take a second look at the cloud."

“Not everything needs to be on the cloud," Finnerty said. "You could virtualize some things in-house and spend half of what you would [with the cloud].”

The middle ground for many companies has been in independent data centers, close to headquarters but with more control than simply signing your data away to Amazon or Google. These "hybrid cloud systems," which also include splitting data requirements between outsourced services and in-house servers, have been increasing in prevalence.

“The migration to cloud technology is most pertinent [to the industry]," Equinix Director of Northeast Region Sales Shawn Kaplan said. "Access to the cloud and how to build a hybrid IT architecture — whether that’s infrastructure as a service, or companies like Office 365 or Workday or Salesforce, it’s a fact that firms have to figure out how to combine a hybrid IT structure.”