The US data center market continues to dominate globally, with the bulk of the data center development concentrated across 10 major metro areas. According to a recent Synergy Research Group report, the Top 20 global markets generate over 60% of the worldwide data center and colocation revenues, with the U.S. having 10 of these markets.

Each of these Top 10 markets has its own unique competitive advantages that corporate IT executives and data center consultants prioritize in their decision-making matrix including:

  • Minimal risk factors
  • Readily available and affordable power
  • Excellent fiber connectivity

Data center industry growth to continue through 2019 and beyond

National data center capacity absorption through the first half of 2019 has continued upward with this growth curve projected for the foreseeable future by every forecaster monitoring this sector. A recent 451 Research report projects that the global colocation and wholesale data center market will “exceed $54 billion in revenue by 2023,” which represents 40+% increase over calendar year 2018. The primary growth drivers are the continued initiatives such as (a) cloud computing, (b) new upcoming technologies related to 5G, artificial intelligence and e-sports gaming, (c) migration of enterprise data centers to third-party managed colocation facilities, (c) customer demand for more content-driven capacity and e-commerce on their phones and computers, and (d) business demand for significant “big data” computing capacity.

Top 10 largest data center metro areas

With an acknowledgement of the research from datacenterHawk and Data Center Frontier, Site Selection Group ranked the 10 largest U.S. data center metro areas taking into account the hyperscale data center campuses, enterprise and cloud facilities, large retail and wholesale colocation operators in place.                             

  1. Northern Virginia/Washington D.C.
  2. Silicon Valley/San Francisco Bay Area
  3. Dallas/Fort Worth
  4. Chicago
  5. Phoenix
  6. Greater New York/Northern New Jersey
  7. Austin/San Antonio Region
  8. Seattle/Portland Northwest U.S. Corridor
  9. Atlanta
  10. Los Angeles/Southern California

What are some of the competitive advantages of some of these data center hubs?

While the players in this Top 10 list have essentially remained consistent over the past few years, some metro areas have climbed up this list dramatically as IT executives have recognized their competitive advantages. To help understand why these regions have been so successful, the following provides information on why some of these metro areas have been and will continue to be considered some of the hottest data center markets in the country.

Northern Virginia/Washington D.C. is lapping the field as the largest global market

The Northern Virginia region — concentrated in the Ashburn area but including other cities in Loudoun and Prince William counties — has become the epicenter for cloud computing and wholesale colocation. It has crossed the threshold of a whopping 1000 megawatts of total commissioned power this year, which is hundreds of megawatts ahead of any other market.

The region benefited from being one of the first markets where the Internet backbone was constructed, when AOL Online, Exodus and MCI located their initial technical facilities. The region also enjoyed both its proximity to the federal government with its specialized technical needs and the growth of the colocation sector, including Equinix’s Ashburn campus. Equinix was one of the first carrier-neutral colocation operators and this campus has evolved into one of the most critical and densest Internet ecosystems.

The concern with this market is the spiraling land prices, due to a feeding frenzy among intense competition for desirable sites. Many of the large hyperscale users are land-banking sites to ensure their expansion while also considering the more expensive option of going multistory with their data center developments. The data center site selection is expanding further out from Loudoun County where several developers and cloud groups are finding success.

Pretty much every major enterprise class data center developer and colocation operator —Digital Realty, CyrusOne, Amazon Web Services, QTS, COPT, CloudHQ — maintain massive facilities with ongoing expansion plans. 

Silicon Valley/San Francisco Bay tight even with new announced development

Silicon Valley enjoys its proximity to many of the leading social media, e-commerce, and tech-savvy corporations but has the most challenges to its dominance as one of the top U.S. markets. Developable land sites, especially in Santa Clara where Silicon Valley Power and its affordable power (30%+ less than PG&E) is the electric utility provider, are nearing (and could exceed) $100 per square foot. Couple this capital with the high construction costs and regulatory constraints has caused most colocation and cloud operators to construct multistory facilities to justify the high cost of doing business here.

Yet this market remains one of the tightest, with demand exceeding supply and operators enjoying pre-leasing activity once they have the municipal go-ahead. Recent announcements by CyrusOne, Digital Realty, Vantage, CoreSite and RagingWire totaling hundreds of megawatts are reinforcing Silicon Valley’s status as a top market.

Dallas/Fort Worth has been on a construction boom and has improved its ranking

The DFW region remains high on every data center consultant’s list due to its advantageous risk assessment, great connectivity, available power and solid business climate. DFW also enjoys those corporate headquarters located here across a broad mix of many industries and its position in the central U.S.

The DFW region has primarily grown as an attractive enterprise colocation market and is also growing as its cloud infrastructure has expanded. Facebook’s Fort Worth campus has expanded multiple times and is now over 1.5 million square feet (SF) and 150 MWs. Google also announced earlier this year its massive $600 million Midlothian campus in northwest Ellis County. On the colocation front, the DFW region has over 25 colocation and managed hosting competitors, including such operators as TierPoint, CyrusOne, Equinix, Flexential and Digital Realty.

Phoenix will be a dominant player and will continue to move up the list

Over the past five years, the Phoenix market has vaulted from the bottom rung to be in the No. 5 position. But with several recent announcements, metro Phoenix could possibly move up another notch or two. This region had always enjoyed its reputation as a very safe and highly connected market with proximity to the West Coast. With the environmental risks experienced in California, those corporate IT executives searching for a close market to locate their data center operations have sought out Phoenix. 

In the past quarter, several large-scale providers began planning major campuses primarily in the west Phoenix region. Microsoft has shown its commitment to metro Phoenix with its recent announcement of three 100+ MW campuses with two being in Goodyear and one in El Mirage, to support the demand for cloud and Internet services. Compass Data Centers, noting its recent capital raise, has secured land for a 350+ MW campus. And Stream Data Centers acquired a 418,000 SF facility with 157 acres of land that will allow them to construct over 2 million SF and 350 MWs at full build out.

Atlanta is a sleeper but an excellent region for new mission-critical operations

Simply put, Atlanta checks all of the boxes which is why it is in the Top 10 and in addition can offer favorable economic incentives, affordable power and a very pro-business environment. The expectation is that Atlanta will supplant a few other markets and move up the list.

Competitors such as QTS Data Centers, SWITCH, Equinix Cyxtera and STACK Infrastructure all have major campuses, primarily focused on the western sector of Atlanta in Douglas County, while Google and Facebook (in Stanton Springs) have substantial operations.

Conclusions

There may be some shuffling within the Top 10 list as newly commissioned facilities come on line, yet these Top 10 will remain the “go to” markets for the foreseeable future.

 

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