Finding A Floor for Price
Turns out, 2013 was a pretty active data center year. (Data centers took their New Year's Resolution to work out more seriously than we did.) And that's despite an excess of second-generation supply glutting some markets.
Avison Young issued a year-end report on the data center leasing market for 2013 and showed leasing activity up 25% from the year prior. Microsoft's expansion during the first half of the year and other company growth, such as LinkedIn and Dropbox, definitely helped pump those numbers. Avison Young's Jim Kerrigan (here with his 7-year-old daughter Alexis, who has mastered flight, in St. John this past holiday) says the big trends last year were a downward pressure on data center pricing and a geographic dispersing of where companies leased data center space. “Some of the places that have a glut of space continue to have a glut. But there are positives in markets like Denver that really wasn't a market before and did some pretty big deals,” Jim says. (Can we credit Peyton Manning for that, too?)
So what's on tap for this year? Jim says companies may be seeking a floor to pricing finally, especially the giant players like Digital Realty, whose stock has taken a beating on Wall Street this past year. “I don't think [Digital] is going to stretch far to make deals as they once did because of their stock price,” he says. Add to that very little spec data center construction has gone underway in the past year--despite continued absorption of over 1M SF/year--and available space dwindles. And while MSFT's new CFO put a hold on data center leasing last year, that may thaw out with a renewed interest in grabbing more space.
Jim most recently helped SingleHop expand its data center presence in Suburban Chicago with 1.5MW of power at Digital Realty's Franklin Park facility. SingleHop is one of the country's fastest-growing web hosting companies. And it's that sector that will be one to watch this year, Jim says, given the adoption by many companies to outsource, especially Oracle, which just announced its entry into the Cloud. (There haven't been this many people with their heads in the clouds since the '60s.)