The Next Tier of US Data Center Markets Beyond the Top 10

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.

Denver

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:

• Flexential offers over 500,000 square feet (SF) of raised floor capacity across five locations, including its 240,000 SF Englewood site that can deliver over 1500 watts per square foot of power density.
• Equinix provides over 81,000 SF of dedicated colocation space in two area locations.
• H5 Data Centers made significant upgrades to an existing 300,000 SF United Airlines data center campus in the Denver Tech Center area and can now deliver over 17 MWs of power.
• Iron Mountain Data Centers purchased the Fortrust campus and, as a result, can offer over 210,000 SF of purpose-built space.

Minneapolis

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:

• Flexential, with its suburban Chaska site, can deliver 9+ MWs in a 70,000 SF raised floor environment.
• Cyxtera, at its Shakopee campus, offers over 100,000 SF that is expandable to over 10 MW of critical load.
• DataBank operates two facilities in both the west and east Twin Cities that can deliver over 20 MWs critical load across 56,000 raised SF.
• Cologix operates over 45,000 SF of colocation space at 511 11^th Avenue South, which is a carrier hotel. A few other colocation groups also operate in the 511 building, such as vXchnge.

Boston

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:

• TierPoint provides over 100,000 SF of raised floor data center across two facilities in Andover and Marlborough.
• CoreSite offers small racks to private suites in its 253,000 SF data center.
• Evoque Data Center Solutions has over 62,000 SF of raised floor at its Watertown site.
• Lightwave Networks is an operator with two locations in the U.S., with a 130,000 SF Boston site being able to deliver over 10 MWs of critical load across 40,000 SF of data center.
• Navisite operates a network of seven global data centers in the U.S. and the U.K., including its 56,000 SF raised-floor data center in Boston that can deliver 6 MWs to the data floor.

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:

• EdgeConneX is a global operator that has two facilities totaling 9 megawatts across almost 47,000 SF of data center.
• QTS Data Centers offers a ~40,000 SF data center can withstand a CAT 5 hurricane.
• Flexential has over 3 MWs of critical load in the 64,000 SF facility located in Fort Lauderdale.

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:

• Switch Las Vegas was founded in Las Vegas. Its first campus here could grow to over 3.5 million SF and deliver up to 430 MWs of power upon full buildout.
• Switch Tahoe Reno and its Citadel SuperNAP campus could exceed 17 million SF and 850 MW of power. The company targets the Silicon Valley market with its green offerings and very competitive pricing.
• Cyxtera is a global colocation group that operates a colocation facility within Switch’s location.
• zColo offers 3 MWs of critical load over 30,000 SF of raised floor.

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.

Conclusions

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.