Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
Issue link: https://westernrealestatebusiness.epubxp.com/i/873170
www.REBusinessOnline.com Western Real Estate Business • September 2017 • 77 THE WEST'S DATA CENTER MARKET CONTINUES CALCULATED GROWTH Denver By Mark Bauer, Managing Director Denver is seeing growth similar to its Western counterparts, but on a smaller scale. Managed services and retail colocation dominate demand and are looking for expansion, but de- velopment remains limited to down- town and the Centennial areas where power and fiber are readily available. There is 24,000 square feet (3 Mega- watts) under construction and 170,000 square feet (27 MW) planned. Peak 10's acquisition of ViaWest and Iron Mountain's acquisition of MAG Data- centers, which operates FORTRUST, will create new avenues for growth and open new options. Las Vegas (Bauer) Most data center growth in Las Ve- gas comes from existing customers in gaming, social media, entertainment, e-commerce and finance. Demand is satisfied by two major providers: Vi- aWest (being acquired by Peak 10) at its Lone Mountain project and Switch at its new 40 MW Las Vegas 10. Plans are also in place for Las Vegas 11. Cloud options are available for ten- ants seeking a hybrid approach. Las Vegas and Reno together achieved a consistent net absorption of 7 MW in 2017, thanks in part to low — and still falling — power rates. Most new growth is projected for Reno, where Switch is building the 7.2-million- square-foot Citadel Campus, whileo- thers are considering a market entry. Los Angeles By Darren Eades, Executive Vice President The Los Angeles data center mar- ket is seeing an increase in demand, primarily from tech and media indus- tries, though other traditional com- panies in the financial and healthcare sector continue to seek data center alternatives. Many colocation provid- ers are increasing their service offer- ings and diversifying their practice, thus encouraging them to reevaluate how they use their current data center footprint. As many companies push to the cloud, providers need to be ultra- competitive with pricing and creative with additional services. We are also seeing a surge of Asian companies looking to establish a presence or in- crease their footprint in Los Angeles, seeking space in the telecom, tech and content delivery business. Northern California By Raul Saavedra, Executive Vice President Leasing velocity returned to histori- cal norms in Northern California in the first half of the year with about three Megawatts (MW) of net absorp- tion, but fundamentals remain steady. High power costs throughout the market, along with higher rents and lower vacancy than nearby markets is keeping supply and demand in line. In a total market of 4.6 million square feet and 424MW capacity, there is cur- rently 167,000 square feet and 23MW of availability. Another 325,000 square feet and 76MW of supply is planned or under construction. These new blocks of space will provide users, especially cloud providers and technology busi- nesses that currently dominate Bay Area demand, with more options in the mid-term. Pacific Northwest By Conan Lee, Managing Director The Pacific Northwest data center market is one of the largest and most developed data center markets in the world. However, many of the region's largest data center occupiers own their assets and, therefore, these sites are not analyzed when comparing demand and absorption. The flurry of M&A; activity has had a major im- pact in the Pacific Northwest with many of the acquired companies hav- ing data center operations in Seattle, Central Washington or Hillsboro. Last year was a record year for demand. Though 2017 has started off slower, we expect significant activity to occur in the last two quarters of the year. Phoenix (Bauer) While national data center absorp- tion is calming, Phoenix is ramping up. Construction by Aligned Data Centers, CyrusOne, Digital Realty and IO Data Centers is transforming the valley from remarkably supply constrained to now flush with turn- key options. This includes almost 90 MW of new product ready to satisfy demand from enterprise and cloud users that is so strong, it rivals leaders like Virginia, Silicon Valley, Dallas and Chicago. Phoenix has exceeded 18 MW of absorption already this year, surpassing the 15 MW absorbed in all of 2016. Expect more opportunity from ViaWest's acquisition by Peak 10, Cyxtera's purchase of Century- Link assets and Digital's acquisition of Dupont Fabros, which recently pur- chased 56 acres in Mesa, near Apple, for data center development. n DATA CENTERS from page 1 The Fortrust Denver data center was originally built in 1946 as a Firestone Tire warehouse, which provided above-code, rated fire walls and significant structural attributes that are beneficial to data center stability. Fortrust purchased the Denver building and completely renovated the existing shell, adding a three-story structure to the data center in 2001. these strengths with Whole Foods' 467 locations, existing supplier net- work and brand that is known for quality. Together, the unified offer- ing has the potential to offer more than the sum of its parts, possibly reinventing the grocery business in the process." The new, massive brick-and-mor- tar footprint for Amazon will create a massive testing ground for what- ever innovations Amazon has in mind, adds the report. Although the commercial real es- tate community largely views the acquisition as a positive develop- ment, the marriage of these two dy- namic companies will face its share of challenges. "Whole Foods operates at a high- margin price point, yet Amazon has made lowering costs and margins a key factor of its success," according to the report. "These strategic differ- ences must be carefully integrated in order to realize the clear syner- gies between the brands. Amid pitched competition in the grocery sector, losing customers could be costly for both enterprises." n continued from page 74