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Data Center Boom Nowhere Near Finished

National Data Center

Big companies are investing more in data centers than ever before. And as we heard at Bisnow's national Data Center Investment Conference & Expo (DICE) last week in DC, it's why IT pros are now getting a cushier seat at the executive table. (No longer are they clustered by the vending machines and asked politely to not join the company softball team.)

At the Renaissance Arlington Capital View in Crystal City, Va., Himes Associates CEO Paul Himes said that data centers are now an integral part of a company's real estate strategy, and it's vaulting IT professionals to more impactful roles. "Corporate real estate guys have gone down in the pecking order, and IT guys have risen," says Paul. (All those years playing SimCity have finally paid off.) Paul adds that high-profile data breaches like the one Target just went through is also an impetus for companies to get smarter on how they store data.

Going to colocation centers is another option some big firms are using, Paul says, since some companies build properties way beyond their capacity needs. Though shacking up with other users in a colo space isn't as controlled an environment as some firms would like, it helps drive efficiency for data storage, he points out. (It can also make for a great Odd Couple-style sitcom.)

451 Research's Katie Broderick (with CBRE's Tom Cleaver) says the tier one markets of DC, LA, Chicago, NYC, Dallas, and Silicon Valley are far and away the desired landing spots for new data centers. To Katie, there isn't even a tier two behind these locations, rather "a whole bunch of tier threes," since the power, fiber, and workforce of the top six can't really be matched. Tampa, Portland, and Austin could become popular data center hubs in the future though, she adds.

CyrusOne VP Fred Holloway tells us to expect cloud computing to keep ramping up over the next few years. (It's raining data.) His firm builds specialized colo centers throughout the country (including one under construction in nearby Sterling, Va.), and Fred says providers need to "build a sky for the cloud," through specialized and easy-to-modify properties.

Some firms aren't biting on the cloud or the colo trend just yet, though. GEICO facilities Derrick Milliard (with Sutherland's Rob Plowden) says it's too risky to put customers' personal information in a colo space. Plus, as a well-capitalized company that can afford to buy, build, and manage its own data centers, GEICO doesn't have to worry about risking its proprietary data on a public cloud. (Plus they would need more room for all their different commercial spokespeople.)

Compressing yields in other real estate asset classes (as well as the stock market) are causing investors to look closer at buying up data centers, says DH Capital's Doug Webster (second from right, with Mintz Levin's Jeff Moerdler, Columbia Capital's John Siegel, and Rugen Street Capital's Rob Morris). "The universe of buyers is broadening significantly since revenues are declining in other investments."

We caught up with Mark Thomas from Georgetown—not the DC neighborhood, rather the city just outside of Austin, TX. Mark serves as Georgetown's director of economic development, and says the city is actively marketing sites for data center construction, hoping that another big company follows in the footsteps of Citigroup, which built a $450M facility there in 2008.