by Brianna Crandall — December 15, 2014—With the need for data centers growing exponentially, the window of opportunity is open for companies seeking data center space and solutions, according to global commercial real estate services firm JLL’s (Jones Lang LaSalle) inaugural Data Center Outlook report.
Worldwide information technology (IT) spending will top $3.75 trillion in 2014, and growth is expected to accelerate in 2015 as the next phase of personal cloud movement infiltrates consumer-focused IT. Fueled by the outsourcing of IT infrastructure by businesses and the popularization of cloud computing, the growth in this sector is expected to drive data center revenue to $14.8 billion by 2016, a 32 percent increase over 2014, according to JLL.
For those looking for data center space, providers are offering 10 to 15 percent discounts, concessions, and tenant improvements on some deals, according to the report. However, increasing demand and a pull-back on construction mean that by late 2015, the market will tighten and providers are expected to take control.
Northern Virginia has become the market leader
Northern Virginia, sometimes known as “Data Center Alley,” is one of the world’s most important data center markets globally, offering 2.4 million square feet of data center space with 498.3 megawatts of available power, according to the research findings. Offering the industry’s best latency, a measure of network traffic speed, Northern Virginia has become the country’s market leader for enterprise users and cloud computing.
“Northern Virginia provides enterprise users a strategic advantage over other data center markets: low cost electricity, customer density, enormous bandwidth with low latency, speed to market permitting, geographic neutrality to natural hazards and low total cost of ownership,” said Allen Tucker, Managing Director in JLL’s Tysons, VA, office. “Power costs in Loudoun County remain steady and very cost competitive compared to other Tier 1 MSAs that enterprise users naturally consider for their technology deployment.
“Not to mention the county has focused on developing the best-in-class infrastructure to make this industry its primary economic engine for both data center operators and enterprise users,” added Tucker. “Further, Northern Virginia has exploded as the Silicon Valley of the east with its marquee list of companies establishing a large footprint here for data centers.”
While many markets have seen data center providers pull back on construction projects and offer discounts and concessions to fill available vacancies, Northern Virginia continues to see new operators entering the market to develop additional product. More than 107,000 square feet of data center development is underway in Northern Virginia, and an additional 882,150 square feet is planned for the market. The competition to fill this space will force providers to be aggressive with their pricing and concessions, which will drive deal velocity, according to JLL’s report.
“This area is seeing increased demand across all industries,” added Tucker. “Proximity to the federal government, high-quality technology workforce, new 2.0 dot-com enterprises, an affluent population base, growing entrepreneurial community, and excellent institutions of higher learning all support the growing demand for market share in Northern Virginia.”
