What are the Up-and-Coming Data Center Markets in 2017 – Second of a Two Part Series

by Michael Rareshide, on Jul 21, 2017 11:46:52 AM

In the first of this two-part series, What are the Up-and-Coming Data Center Markets in 2017, we wrote about the distinctive drivers of the top 10 largest data center markets in the U.S. that corporate IT executives and data center consultants repeatedly reference as priorities in their data center site selection criteria. 

They may require that the data center be located in these top 10 markets simply because these markets are in large populated business centers. But these critical site selection factors for enterprise data centers and colocation operators — such as available and affordable power, robust fiber, strong IT workforce, significant site and construction infrastructure, and minimal disaster risk — can be found in other markets.  

Advances in technology and fiber have mitigated much of the connectivity and latency concerns enabling many metro areas comparable advantages as the Top 10.

Large data center operators have sites in tertiary locations
Major technology and cloud providers, including Facebook, Google, Amazon and Microsoft have found enormous success in locating new hyperscale raised-floor data centers in other Tier 1 and 2 metro regions that had a minimal or nonexistent data center market. While part of these large corporations’ site selection factors would also include geographic diversity, utility savings and the available economic incentives, their data center site selection underwriting checked the boxes for an excellent site.

What are some examples of tertiary data center markets?
The following list focuses on a few selected metro areas outside of the Top 10 (or even the next 10) for potential new data center and colocation growth, including another untapped metro area.

Omaha, Nebraska-Council Bluffs, Iowa
This region calls itself the Silicon Prairie and it is reasonable to see why. The Omaha/Council Bluffs metro area enjoys very low disaster risks, high-speed fiber connectivity, renewable energy initiatives and attractive economic incentives, so it is no surprise that a number of enterprise groups have committed to this region.  The renewable energy opportunities cannot be overemphasized. The region can offer wind power in enough capacity for the high requirements of these mission critical sites. Its cooler climate can also generate “free cooling,” a green initiative that allows for the intake of the outside cold air into the data center, thus not utilizing the HVAC systems.

Major projects announced or under construction include:

  • Google’s $1.5 billion data center comprising two locations in Council Bluffs, Iowa, its largest in the world. Since 2009, Google has expanded its Council Bluffs sites four times.
  • Yahoo’s 180,000-square-foot data center in LaVista, Nebraska
  • Fidelity Investments’ $200 million enterprise class data center in Papillion, Nebraska, in Sarpy County
  • Travelers Insurance’s 183,000 SF $200 million data center also in Sarpy County
  • In April, Facebook announced plans for a 146-acre 900,000 SF data center campus in Papillion with its first phase projected to open in 2020.

For such a dynamic region, the competitive landscape for colocation providers only comprises one dominant player, TierPoint, with the rest being small regional operators or telecom companies. TierPoint has two locations in Omaha, one in Papillion and another in Bellevue, from its acquisition of CoSentry, for a combined total over 150,000 SF.

Kansas City, Kansas-Missouri
With a metro population of over 2.3 million and with numerous high-tech corporations headquartered here, the Kansas City region can provide many compelling reasons to be a data center hub. Its roots trace back to the ’80s when Sprint was a pioneer in phone, long distance and telecom, developing much of the cross-country connectivity through Kansas City.  

Other high-tech corporations also have helped stamp Kansas City as a solid location. Cerner, the health care information technology company, operates its data center on its Lee’s Summit campus. DST Systems, another large data processing corporation based here, operates multiple data centers with other critical operations totaling over 1 million SF.

Kansas City generally provides a solid low-risk profile while achieving high marks for ease of low-cost power, connectivity and construction costs. 

The colocation competition is primarily focused on the retail colocation sector with a few wholesale colocation providers and some notable underground colo providers, noting the following:

  • Netrality – owns the primary telecom hotel at 1102 Grand and offers retail colo space
  • TierPoint – operates two state-of-the-art facilities totaling over 85,000 SF in suburban Kansas City
  • QTS – this global colo and cloud provider is based in KC and has only a small colo operation here
  • DataBank – has two suburban sites totaling ~20,000 SF of raised floor
  • LightEdge Solutions – operates a 60,000 SF data center in Hunt Midwest’s SubTropolis underground site.
  • Cavern Technologies – its 200,000 SF underground facility in Lenexa can provide up to 50 MW.
  • Iron Mountain – operates a 22-acre campus with its carrier-neutral underground colo operations as part of its multitenant data center strategy announced in 2013

Salt Lake City, Utah
While just barely in the top 50 U.S. Metropolitan areas, Salt Lake City is closer to being in the “Next 10” data center market. It, too, has a low risk profile like all of the aforementioned markets and offers low and reliable power including renewable alternatives. The NSA operates its $1 billion data center in Bluffdale. Many Silicon Valley corporations, such as eBay, Twitter and Oracle, have large enterprise class operations here. 

The competitive landscape includes:

  • ViaWest – In its seven locations across the region, ViaWest offers ~95,000 SF of colocation space.
  • DataBank — With its early 2017 acquisition of C7 Data Centers, it has three interconnected facilities, totaling over 22 MW of critical load across 160,000 SF of raised floor.
  • EdgeConnex – EdgeConnex recently entered the market with a high-density 14,000 SF space.

Colorado Springs, Colorado
This metro area is relatively untapped but it enjoys many of the same strong factors as nearby Denver in data center site selection, yet can provide a more affordable solution. It also enjoys a solid reputation in the high tech and semiconductor sector. The region has the stamp of approval from several notable enterprise corporations that have their mission critical operations here including:

  • Wal-Mart’s 210,000 SF primary data center
  • HP’s 250,000 SF data center on its campus
  • FedEx’s data center and technology center totaling over 160,000 SF
  • And most recently announced in mid-2016, software giant SAP’s planned massive-scale 100,000 SF facility on T5 Data Centers’ campus

So far, the notable colocation competition in this area is T5 Data Centers, which is only offering large data center solutions. This national developer, with a portfolio of over 100 purpose-built, enterprise grade facilities, has a 64-acre campus where it can provide wholesale colocation or large turnkey data center build.

For the data center site selection consultant, these metro regions are among several excellent choices. Many 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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