The U.S. data center market is concentrated across a top tier group of 10 markets that are important financial centers and population hubs but which also have significant advantages in data center site selection.
The next tier of data center markets provides a critical need for both colocation companies and cloud initiatives that generally do not receive as much attention. We do not hear the dominant cloud customers such Facebook, Google or Microsoft leasing multi-megawatts of critical load in these markets. The critical site selection factors for both enterprise data centers and colocation operators — such as available and affordable power, robust fiber, strong IT workforce, and significant site and construction infrastructure with minimal disaster risks — can certainly be found in other markets.
These secondary data center markets are an important colocation strategy for many companies. They help expand the high-tech “edge” by moving technology closer to consumers’ media devices like cell phones and gaming systems so they enjoy faster load speeds. The robust infrastructure in these secondary markets caters to those regional corporations that may be required to have their IT operation within the state or within its territory.
The following highlights some of the “Next 10” markets, in no particular order, along with their strengths and competitive landscape.
The Denver Metro area enjoys many competitive advantages in data center site selection from both a lack of risk factors to a favorable climate. It has a great corporate business center and its proximity to the West Coast provides it with a large customer base to draw from in both northern and southern California. These customers seek lower overall data center costs than California with less environmental risk for disaster recovery solutions.
The wholesale and retail colocation competitors are comprised of the following:
This central U.S. metro region is a major business hub with 17 Fortune 500 headquarters, including Target, US Bank and United Health. In addition, its colder weather climate allows for data center operators to save costs by using “free cooling,” which allows for the intake of the outside cold air into the data center, thus not utilizing the HVAC systems.
Several colocation operators provide a competitive landscape and include:
With operating expenses, construction and power costs much higher than the national average, the Boston region generally caters to its significant population base across the New England region. The region has over 20 colocation operators with some local and national competition including:
Miami / South Florida
While inherent weather risks are noted for the region, South Florida caters to both the Florida corporate community along with those corporations catering to South America and Europe. Significant fiber and cable landings connecting to these continents flow through the South Florida area.
The massive 750,000 SF NAP of the Americas – one of the largest interconnected carrier hotel facilities globally and now operated by Equinix – is by far the dominant player here, but a few other competitors also offer colocation space:
Las Vegas / Reno
Both the Las Vegas and Reno regions are included despite their geographical distance within the state since both metros provide an excellent low disaster risk for data centers, while also being accessible to the California tech community. Its excellent infrastructure, affordable land and easily available power are all strong drivers.
They do not have the larger business climate and population centers as Minneapolis and Denver but do offset that with cheap land, excellent incentives and ready access to affordable power.
The overall competitive landscape is largely dominated by one provider with some other notable groups:
Other markets not discussed but that certainly could be considered part of the Next Tier would include the Charlotte-Raleigh corridor, Kansas City-St Louis, Houston, Philadelphia (including Lehigh Valley) and Nashville.
In the data center site selection matrix, as data center demand continues to expand outside of the Top 10 markets, such as metro areas as Northern Virginia, Dallas-Fort Worth, Silicon Valley and Chicago. Many metro areas are solid alternatives to the Top 10 markets and could provide an excellent solution for enterprise data centers and colocation customers.