In data center site selection, the New York-Northern New Jersey metro area — as the epicenter for financial services, healthcare, pharmaceutical corporations, major media and telecommunications — is the fifth largest data center and colocation market in the U.S. Not surprisingly most of these businesses need to maintain robust operations close to their corporate office, stock exchanges and population centers. Yet with all of the significant recent “multi mega-watt” data center and colocation activity seen in many of the largest U.S data center markets, it can be argued that this region has not enjoyed a corresponding share of this growth.

 The history of the New York- Northern New Jersey data center and colocation market
During the Internet boom of the late ’90s, the New York-Northern New Jersey data center market was broken down into three fairly distinct sections. Manhattan consisted primarily of telecom carrier hotels such as 111 8th Avenue, 60 Hudson, 75 Broad with a handful of retail colocation operators concentrated downtown.  

In nearby Jersey City, Weehawken and Secaucus, other retail colocation operators and many financial firms housed their critical operations. These raised-floor operations had to be proximate to the company’s operations due to latency concerns (the amount of time the data, such as stock trades, take to transverse the system). The third sector consisted of larger enterprise data centers concentrated in the northern New Jersey submarkets. The northern New Jersey area provided these corporations more reliable power at significant cost reductions compared to Manhattan construction and utility rates.

As faster fiber connectivity improved and more corporations wanted to diversify their operations after 9/11, the Northern New Jersey submarket continued to grow, including the retail and wholesale colocation sector. Enterprise class colocation and turnkey data center developers and operators such as Digital Realty and Equinix built significant footprints in the region with many other data center developers entering the competitive landscape.

Regional barriers to further growth
When the colocation data center market was in its formative stage, the New York-Northern New Jersey region had been one of the top two U.S. markets, with only Silicon Valley being larger. Once Northern Virginia and its burgeoning cloud and data center campuses took over the No. 1 spot worldwide, the New York-Northern New Jersey metro area was still in the top three as recently as 2012. But Chicago and Dallas/Fort Worth have pushed the New York-Northern New Jersey area down a few rungs as several factors and issues converged to impact the New York-Northern New Jersey market at roughly the same time. 

Superstorm Sandy had a significant impact, with its devastating flooding across the entire metro landscape, prompting many major corporations to seriously consider relocating substantial mission critical operations out of the tri-state area. Significant technological advances in latency reduction have expanded the geography to house a data center. Finally the ongoing trend of corporations’ decommissioning their enterprise data centers in favor of well-maintained wholesale data center and colocation operators outside of the region have made an impact.

Other important factors in the data center site selection matrix also favor other Tier 1 colocation markets. The New York-Northern New Jersey region has much higher than average construction costs. Its utility rates, which exceed 15 cents per kilowatt hour compared to most other national markets that can be below 7 cents per kwh, are also among the highest in the U.S. Other markets have provided easy-to-obtain economic incentives that can reduce the infrastructure costs in the millions that are simply not being offered in the metro area, though this sentiment appears to be changing.

The region remains a preferred option for many international firms entering the U.S. Despite Superstorm Sandy, the region does enjoy minimal hazard risk, great fiber infrastructure including international cable landings, highly skilled workforce and the need for many corporations to have some proximate data center operations in the area.

The competitive landscape
Here’s a look at some of the competition in the New York-Northern New Jersey region of note:

  • Equinix: The largest colocation operator in the region with nine locations concentrated in Secaucus also offers its Equinix Financial eXchange hosting for a large group of financial market participants.
  • Digital Realty: This provider has significant operations in four Manhattan carrier hotels and approximately 1.4 million square feet of data center space in five locations across Northern New Jersey.
  • QTS Realty: With its acquisition of the 360,000-square-foot former Dupont Fabros data center in Piscataway in 2016, QTS has three New Jersey locations offering nearly 300,000 SF of raised-floor data center space.
  • Sabey Data Centers: Its Intergate.Manhattan facility at 375 Pearl can provide both turnkey colocation and powered shell space.
  • CyrusOne: This data center provider has two New Jersey locations totaling over 600,000 SF and 60 megawatts with three other locations in the tri-state region.


Despite recent trends and competition from other U.S. data center hubs, the New York-Northern New Jersey data center market will always be able to rely on its core financial services, healthcare and life sciences groups as a strong customer base for colocation and powered shell space. The need to be close to New York City will enable the colocation market to continue to grow, yet at a smaller pace when compared to Northern Virginia, Chicago, Dallas and Silicon Valley.


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