What are the Up-and-Coming Data Center Markets in 2017?

by Michael Rareshide, on May 24, 2017 8:25:31 AM

As data center demand continues to explode across the country, most the demand is concentrated in the Top 10 markets — well-known metro areas as Northern Virginia, Dallas-Fort Worth, Silicon Valley and Chicago. In this first of a two-part series, we’ll examine how other smaller, Tier 2markets, can also provide the critical factors necessary for major colocation operators and data center users. 

Critical site selection factors for colocation operators such as available and affordable power, robust fiber, a strong IT workforce, significant site and construction infrastructure, and minimal disaster risks can certainly be found in other markets. Economic incentives in the form of abatements and tax rebates to assist in some of the significant up-front construction have become an important tiebreaker in the final location decision.

For data center site selection, what are the up-and-coming markets or regions colocation operators should consider?  The following will focus on some of the “Next 10” as well as untapped metro areas set for potential new data center and colocation growth in 2017 and beyond.

With a population of nearly 4 million and 15 Fortune 500 headquarters, the Minneapolis region certainly is a major business hub. Thus, the data center and colocation need would be apparent on a regional basis. The region also amended certain economic incentive qualifications a few years ago that makes many data center operators eligible for incentives.

Minneapolis’ data center market is also growing because it can “sell the cold.” Its colder climate can provide these enterprise class data centers with the green concept of free cooling, which allows for the intake of the outside cold air into the data center, reducing the need for HVAC cooling.

Competitors in the wholesale and retail colocation operators in Minneapolis include:

  • ViaWest – over 9 MWs in a 70,000 SF raised floor environment
  • DataBank – two facilities with over 20 MWs critical load in 56,000 raised SF
  • Stream Data Centers – recently announced a $250 million data center build-to-suit for US Bancorp to add to Stream’s existing 76,000 SF Chaska location 

The Denver metro region boasts over 3 million people with 10 Fortune 500 corporations, so its business climate is significant. A FEMA low risk disaster zone, Denver’s proximity to the West Coast also provides a large colocation customer base seeking to reduce their data center costs from much higher-priced markets with more disaster risk.

Many major competitors have been active in this market including:

  • Equinix – over 81,000 SF of colocation space
  • H5 Data Centers – acquired the massive Travelport Data center, investing significant upgrades in this data center
  • Fortrust Data Centers – over 50,000 raised floor SF and 65,000 SF of data center module with future expansion
  • ViaWest – over 278,000 SF of raised floor capacity and headquartered here

Las Vegas / Reno
Both the Las Vegas and Reno regions are included despite their geographical distance within the state since both metro areas provide an excellent low disaster risk for data centers, while also being in proximity to the California tech community. They do not have the larger business climate and population centers that Minneapolis and Denver do,but that is offset with cheap land, excellent incentives and ready access to affordable power.

Reno has enjoyed significant press on its existing 1+ million-square-foot facilities for Switch and Apple, and now Google announced a similar massive cloud data center on 1,200 acres.

The competitive colocation environment in both markets for many years consisted of small retail colocation players, until Switch entered the market in 2008 with its debut goliath site in Las Vegas. 

The general competition, dominated by Switch, is summarized:

  • Switch Las Vegas – capacity for up to 2.4 million SF, delivering up to 325 MWs
  • Switch Reno – Citadel SuperNAP campus could exceed 7 million sf and 650 MW of power
  • zColo – 2.8 MWs critical load over 30,000 SF of raised floor 

Albuquerque – a sleeper poised for growth
This metro region has been a little surprising over the years for its minimal data center activity in place. The area has a low risk profile and other attractive factors for data center site selection.  One limiting factor remains its high barrier requirements in qualifying for state and local economic incentives, which is mitigated by its low cost of infrastructure.

That should all change this year.  With Facebook’s announcement of its planned suburban Albuquerque $1 billion data center in late 2016, Albuquerque now has a top data center trailblazer putting its stamp of approval and confidence in this market.

With only a few smaller colocation players in this metro area, Albuquerque should expect some serious looks from both major enterprise groups and also some data center colocation developers after the Facebook announcement.

In the data center site selection matrix, there are numerous large metro areas that for one significant fault or another, are not great choices to house a customer’s precious IT equipment. Many other smaller metro areas are solid alternatives to the Top 10 markets and could provide an excellent solution for enterprise data centers and colocation customers.


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