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1Q 2021 Data Center Market Highlights: What We’ve Noticed and What to Expect With the first quarter of 2021 now complete and the second quarter of the year being well underway, datacenterHawk will be taking a look back over the key data center market highlights of 1Q 2021. Here, we’ll be discussing our top takeaways from the quarter, as well as touching upon our expectations for the second. Overall, while 2020 was one of the strongest demand years in the industry, the remaining market fundamentals in 2021 seem to be robust. Consistent Hyperscale Demand With 2020 being one of the largest growth periods in the history of the data center industry, many wondered just what the first quarter of 2021 would look like. What we quickly realized is that the expansion of hyperscale users- not just in the United States but in Europe and Asia- would continue to grow. While quarter one of 2021 didn’t see quite as much hyperscale demand in comparison to the previous quarter, demand was still consistent and stable. As we look to the remainder of 2021, we expect to see the continuation of a dual strategy from hyperscale companies who are looking to lease and own their data center portfolio. The Resurgence of Enterprise Demand Another key highlight that we can take away from Q1 of 2021 in the data center market is the resurgence of enterprise demand. While you could argue that this is a market by market trend, we view it as being a fairly holistic change. When COVID first hit, things went pretty quiet on this front. Now, there appears to be more RFPs in the data center market for requirements within a particular size range. This is an especially encouraging sign in terms of the beginning of 2021 and leaves us optimistic for enterprise demand to continue to grow throughout the remainder of the year. Key Changes in the North American Data Center Market Northern Virginia– Once again, Northern Virginia led North America’s data markets in terms of absorption. One particular change that leaves us feeling optimistic for the growth of this sector is the continuing growth of interest in locations like Manassas, Gainesville, and Leesburg. While most of this area’s demand has historically been placed on Loudoun county, we now see that demand expanding to the surrounding municipalities. Phoenix– Phoenix is a particularly interesting data center market in North America for a variety of reasons. In the minds of most, Phoenix can be divided into five different areas: the center of Phoenix, Chandler, Mesa, north of Downtown, and Goodyear. Some of the main advantages that can be found in Phoenix are reasonable costs, a competitive market, and the area’s unique ability to scale over time. While there are other markets with similar characteristics, Phoenix is unique in that its market has been validated by the big cloud providers. In terms of Q1 of 2021, demand was greater in Phoenix than the previous three quarters combined. This unevenness in demand highlights the “lumpiness” that is commonplace across the data center industry. Due to hyperscale users focused on maturing their portfolio in Phoenix, the area also experienced a significant uptick in leasing in the first quarter of 2021. With many in the industry seeing the potential for Phoenix to grow to be as robust as the Northern Virginia market, Q1 of 2021 certainly encourages such predictions for years down the road. Be sure to subscribe to our newsletter to stay up to date on the data center industry! – https://lp.datacenterhawk.com/stay-up-to-date

Understanding the challenges data center customers face is the first step toward providing them with a good solution. When Nicholas Laag, CEO and Managing Director of Prime Data Centers, was preparing to open new data center facilities in Sacramento and Santa Clara, his primary focus was on the end-user. The varying needs and demands customers have—from hybrid migration to combining the cloud with their own onboarding—make it crucial for data centers to be able to provide multiple solutions to the people they serve. This mindset makes it possible for data centers to look less like products and more like partnerships. Understanding both the customer's needs and the ways the data center can create a solution is the best way to create a healthy relationship between providers and users. Past behaviors won’t solve future problems Even as recent as ten years ago, data center operators were more likely to focus on the efficiency of the build, only thinking of how the project best worked within their needs and their capabilities. Now, however, it’s more about the operator working in tandem with the customer. That’s why Laag and his team focus on providing a dynamic environment that can provide adaptable solutions. For example, the Prime Data Center in Sacramento—which was chosen as a more cost-effective location to the Bay Area—was designed specifically with the idea of expansion in mind. Laag shares how at this location they have the opportunity to be 100% green, with the cost of power being significantly less than the Bay (and even less than Santa Clara). They also built this campus on a zone that allows them to have their own substation, which has 50 MVA of available power, as well as room for expansion. This allows them to work long-term with companies who may themselves be growing. Building the site on property with room to grow means now that the location is fully leased, they have the ability to increase the footprint and density by 33%. Instead of providing six megawatts per the original design, they’re now able to deliver eight megawatts to the customer. As Laag describes, “If you're not on point in terms of delivery speeds and design flexibility, you will be funneled into a small number of customers.” Having the ability to serve the different needs customers come up with will quickly separate the data center providers who are continuing with antiquated practices from those who are focused on adapting innovative and creative solutions. The COVID effect and looking ahead It’s no secret that the need for creative solutions stems, at least in part, from the increased demands on data centers as a result of COVID-19. Laag believes, however, that COVID is unlikely to have an exponential effect on the fundamentals of the industry. Across the world, data centers have seen an increase in demand, much of which comes from mobile work and remote offices. The pandemic has certainly accelerated the need for and use of mobile work technology that has been available, and it’s reasonable to assume some of these practices will remain. It’s the role of data center providers to understand this positive bump in data usage isn’t something to be counted on in terms of a business model. This again points to the competitive advantage flexibility provides. Being able to meet the heightened demands of customers during COVID-19 has been a real benefit to many data centers, but those who are prepared for a return to normalcy following the distribution of vaccines are best poised to maintain their current and new customers. As Laag shares, “You need two sides to dance.” Some customers are experiencing remarkable growth and their data center providers need to be prepared to grow with them. Yet, at the same time, when the growth wanes, these same providers need to be prepared to move in tandem with their customers.

Roger Süess of Green fills us in on the current state of the Zurich data center market in Switzerland, how it’s developed into what it is today. Check out our video above with Roger Süess of Green to get his take on the Zurich data center market. If you’re short on time, check out the summary of the conversation below. The Current State of Green Green’s current footprint in Zurich consists of 4 separate locations, 2 of which are large campuses focused on meeting the needs of hyperscale clients. Their other locations also serve hyperscale users, but provide space for traditional colocation use as well, and aim to be an IT solution for businesses wanting to enter into the Zurich market. Looking ahead, Green is planning on expanding their presence in Zurich with an additional 2-4 facilities in the city. The Development of the Zurich Data Center Market It’s clear that the Zurich market has been an area of data center growth over recent years. Robert mentions that people see this growth from major data center providers, such as Green, and show concern for potential overcapacity issues. He says that this is a valid concern but he looks at how the data center industry has changed over time and feels confident about the future use and growth of data centers. For a long time, many small to medium-sized businesses owned their own 4-5 MW facilities but recently that has shifted to these same businesses utilizing their IT needs from a data center provider. The data center trends that Green is seeing suggest that there will continue to be a need for additional space and power to come from a data center provider instead of smaller businesses owning their own IT space. Also, that’s without looking at the continued IT needs from the larger hyperscale users. With both of these trends, it’s a safe assumption that having an overcapacity issue will be minimal. We at datacenterHawk have recently started tracking the Zurich data center market. If you would like access to our data and analysis, you can request it here: https://www.datacenterhawk.com/request?feature=insightMarket&market=Zurich Or you can subscribe to our newsletter for general updates on the data center industry here: https://lp.datacenterhawk.com/stay-up-to-date

SkyBox Datacenters has had opportunities to grow in the past 2 years and only look to continue that trend moving forward. Rob Morris took some time to sit down and give datacenterHawk an update on how SkyBox has grown since we last caught up with him 2 years ago. Below are some of the topics we dove into during our discussion. Growth in the Houston and Dallas markets Since we last spoke with Rob, SkyBox has continued to expand in both Houston and Dallas. On their Houston campus, they’ve built several high-density, high power compute projects to bring their facilities to near full capacity. In Dallas, Skybox delivered their last building back in 2018 and decided to watch the market. They kept about 50 acres of land open for a potential build-to-suit opportunity and plan to expand in the market within the next 2-3 years. Opportunity in the midst of the pandemic In March 2020 when Northern America was hit with stay-at-home orders, there was a lot of pain felt throughout the nation. The data center industry is one area that was uniquely put into a position of opportunity and growth. With a vast amount of people suddenly spending more time at home, they turned to the internet to connect with others, which meant more data that needed a data center to live in. Plans for future growth Skybox is planning to expand in 2021, starting with a brand new campus in Elk Grove Village, a high-volume area for data center providers serving the Chicago market. Their first facility, which is currently in shell state, is slated to deliver 190,000 SF and 30 MW once completed in October of 2021. Looking forward We’re excited to see where SkyBox will go and the growth that’s in store for them moving forward. We’ll continue to track them and other data center providers on our platform in 2021 and beyond. Be sure to subscribe to our newsletter to stay up to date on the data center industry.

Below we’ll lay out exactly how we do it at datacenterHawk. At the end of this article, you’ll be able to take our approach and put it to use to help you succeed in your new role. What Data Center Market Research Can Do For You For some, data center market research might be a bit of an ill-defined, fuzzy term. Put simply, market research helps people understand how a certain product or industry is performing. Data center market research can help answer questions like: How much are people selling? How much are people buying? What price are they paying? What trends should I care about to help me make better decisions? Where should I take my business next to give me the best chance of success? Gathering Data You can find data from lots of different sources. Start with information from data center provider websites. They’ll typically list the facilities they operate, where they are, their capacity, and other infrastructure details. Brokerage reports from companies like CBRE or Cushman Wakefield are also great sources of market data. There are also data center market research firms dedicated to providing data and analysis. Many firms offer purchasable reports that they produce on a yearly cadence. Other companies have built online platforms that are easy to use and are constantly updated with real-time data. This is what we’re continuing to build at datacenterHawk. There’s nothing wrong with using good old Google to find out what’s going on. Frequently there will be press releases or announcements whenever a provider is expanding a facility or campus. You can also find announcements across social media. Standardizing the Data As you research capacity data, you’ll want to be pressure testing each data point as it comes in. For example, it’s fairly easy to find press releases about a provider adding a MW to a specific data center. But having 1 MW commissioned or available right now is very different than it being under construction or even just planned. Frequently this portion of the announcement is left off and you need to do some additional digging to figure out what they’re really saying. We recommend you only count commissioned and available power for the most accurate view of the market like we do at datacenterHawk. Verifying the Data As you piece together your market data, you’ll also want to pressure test how reliable the data is. Some firms will extrapolate their numbers with a top-down approach. This means they gather a few sample data points and assume the rest of the market shapes up along the same lines as their sample data. This is great for getting a quick read on the market but isn’t as bulletproof as a bottoms-up approach. With a bottoms-up approach, you go facility by facility in every market and roll up those capacity figures to the national level. This takes a lot more time than going top-down but it’s much more reliable. At datacenterHawk we take the bottoms-up approach to building our market calculations and we do it that way each and every quarter. Just Talk to People Some data just isn’t on the internet. It takes going to conferences, traveling to see people, and helping everyone you talk to along the way. The great part about this is you get to build deep relationships with the people in the space. We’ve even had lots of them on our podcast to talk about what’s transpiring in the industry. If you’re new, we’d love to talk to you too and see what we can do to point you in the right direction. You can also subscribe to our monthly update to get more great content like this along with hard data on the market.

Matthew Madden of DXN Limited talks about the state of Australian data centers and how they use autonomous mining vehicles to grow the IT industry with the edge. This is an episode of HawkTalk, datacenterHawk’s series of candid one on one conversations with executives and leaders in the data center industry. If you enjoyed this episode, you can check them all out on our blog. If you’d like to know when we release future episodes, you can subscribe here. Check out our video above with Matthew Madden of DXN Solutions to get his take on the Australian data center industry. If you’re short on time, check out the summary of the conversation below. Australian data center demand from international cloud providers When COVID became a global issue and a large portion of people began working remotely, they suddenly depended on the support of major North American cloud providers to conduct their virtual business. This sudden uptick in use caused these cloud providers to urgently fill the capacity that had been built in the Australian markets, so that they could provide the support to all the people now working from home. DXN is reducing latency in Australia with edge data centers Sydney is the largest city and the largest data center market in Australia. With that, the further users are from Sydney, which is on the southeast coast of the continent, the more latency they’ll have. DXN has focused their efforts on an edge strategy to get the data centers closer to the users with the goal of lowering that latency gap. Autonomous Vehicles Utilizing Edge Data Centers One area DXN has seen success with their edge data centers is supporting autonomous vehicles in the iron ore mines of Australia. DXN has seen the growth of autonomous vehicle technology in Australia, where that technology is used in the iron ore mines. Trucks and excavators in these mines are mostly operated remotely and to do that, a data center needs to be nearby so the latency is as low as possible. Seeing this need, DXN stepped in to offer their edge data center solution so their data centers could be placed close to the mines for these autonomous and remote-controlled pieces of mining equipment. Tracking DXN and the rest of the APAC market As we at datacenterHawk are excited as we continue to grow and expand our global data center industry information, we look forward to tracking DXN, the Australian data center markets, and the future growth of the APAC region. Be sure to subscribe to our newsletter to stay up to date on the data center industry.

Michael Chan of OneAsia fills us in on the current state of data center markets in Asia Pacific, along with where the latest activity is moving. This is an episode of HawkTalk, datacenterHawk’s series of candid one on one conversations with executives and leaders in the data center industry. If you enjoyed this episode, you can check them all out on our blog. If you’d like to know when we release future episodes, you can subscribe here. Check out our video above with Michael Chan of OneAsia to get his take on the state of the Asia data center markets. If you’re short on time, check out the summary of the conversation below. OneAsia’s Presence in the APAC market OneAsia offers a full range of services including colocation, cloud, and connectivity in multiple markets across the Asia Pacific market. They currently have data center facilities in Hong Kong, Shanghai, NanTong, Singapore, and have plans for additional facilities in Thailand, South Korea, and Japan. Demand in the APAC markets OneAsia is experiencing demand from North American, European based customers but not surprisingly their most prominent demand is from Asian, specifically Chinese, based customers. These customers are from a wide variety of industries, including banking & finance, internet service providers, cloud solution providers, & various online business providers. Growth of newer APAC markets Hong Kong, Shanghai, and other major markets in APAC are reaching their growth potential in terms of data center space. Because of this, among other reasons, there has been an increase in activity in other markets with smaller data center footprints such as Vietnam, Malaysia, & Thailand. Part of OneAsia’s strategy moving forward is to be a pioneer and expand into these smaller markets quite rapidly moving forward. As we at datacenterHawk continue to grow and expand our global data center industry information, we look forward to tracking OneAsia and their future growth. Be sure to subscribe to our newsletter to stay up to date on the data center industry.

We sat down with Digital Realty CFO Andy Power and Giuliano Di Vitantonio, EVP of Strategy & Business Segments, to get their take on recent European data center market growth. Check out our episode above with Andy Power and Giuliano Di Vitantonio of Digital Realty to get their take on the state of the European markets. Or if you’re short on time, check out the summary of the conversation below. Secondary European markets experiencing healthy growth When evaluating demand patterns in European data center markets, it’s usually a safe bet to analyze trends in North America because those changes typically follow in Europe 18-24 months later. Initially these trends start in the FLAPD markets and then cascade into the secondary markets across Europe. The largest trend the European markets have seen over the past 6-7 years has been the demand growth from hyperscale users. Starting in 2014, hyperscale users began to establish their presence in the FLAPD markets and now we’re seeing those users want to get closer to their end-users. Data sovereignty and improving the customer experience are the two main reasons hyperscale users are expanding in Europe which is why we’ve seen growth in markets like Madrid, Zurich, Stockholm, and Vienna. Increasing emphasis on global maturity As the data center industry continues to mature markets in North America continue to grow. But recently other markets around the globe, specifically in Europe, have been growing at a faster rate than the larger North American markets. One reason for this is the US-based multinational hyperscale companies wanting to expand and ramp up their growth closer to their international users. The tech divide between North America and Europe The US has consistently had a lower GDP than Europe by more than 100%. But because the US has been an early adopter and investor in the tech space, Europe’s tech spend has been about 75% of that in the states. To take that even further and more specific to data centers, Europe has invested about 50% of what the US has on data centers and IT infrastructure. These figures indicate there is still room for growth in the European data center industry. Which is another reason the growth in the European markets has been at a higher percentage rate than the US growth recently. We'll continue to track Digital Realty as they continue to grow across the globe. Be sure to subscribe to our newsletter to stay up to date on the data center industry.

It's a game that’s won and lost on speed. The faster information can be delivered from a data center, the more valuable the data center can be to people outside its four walls. Customers Don’t Like Slow Delivery Times Imagine you run a logistics company. The success of your business depends on how quickly you deliver packages. As your operation grows, you build warehouses to swap packages on and off trucks that are going to different areas. Sometimes trucks have to stop at multiple warehouses to get everything they need to take to their destination. Ideally, your trucks can take interstate freeways directly to each warehouse instead of slogging through dense downtown traffic or winding through miles of dirt farm roads. Fast roads directly to a warehouse are better than slow roads that require a roundabout route. Traveling on slower roads or taking roundabout routes ultimately compounds into slower delivery times. Customers don’t like slow delivery times. This is what data center connectivity is all about. You probably caught on that the warehouses in our example are data centers. The packages are information. The roads are the connectivity, the focus of this article. The data center industry is usually accomplished via fiber optic cable lines. And just like the roads, if we want to get traffic where it needs to be as quickly as possible, it’s better to use the fastest, lowest traffic, and most direct route possible. We’ll still need to make stops every now and again to pick up packages or data, but the concept remains the same. The Importance of Connectivity In simpler days of the internet, one computer would talk directly to another and get everything it needed. And a delay of several milliseconds would not cause an issue. Today, companies are using increasingly complex systems to support their customers' needs. It’s not uncommon for a company to spread their IT workload between cloud, colocation, and in-house. Within those buckets, they may have a multitude of microservices spread across different servers. As the number of points of communication increases, so does the importance of keeping those communications as fast as possible. From a user experience perspective, all this operational speed is typically taken for granted, until something goes wrong. In terms of user experience, human factor studies have consistently shown over 30 years that delays of 1 second interrupt the user's flow of thought while delays of more than 10 seconds loses their attention. Users consistently bemoan the slow speeds of websites and apps. In the earlier days of the internet, it was understood that as companies were growing there would be some hiccups. Twitter’s fail whale, which indicated a service outage, even became a cultural icon. However today, as consumer choices on the internet proliferate, a slow load will ultimately become a no-load as customers go elsewhere. All the more reason to focus on speed.

In Podcast 40, we continue our Data Center Fundamentals series and dive into the basics of data center location. Why is the location of a data center important? We go through at all the reasons data center professionals need to know about the location of a data center. Economics Data centers are exponentially more expensive than other types of real estate, and the economic considerations have ramifications on all data center projects. Power cost is one of the most important factors when choosing a data center location as it can constitute up to 20% of the total cost of colocation. The cost of power can vary widely from region to region. Areas like Quincy or Montreal are $0.02-0.03 per kilowatt-hour, while locations in the Northeast US can be up to $0.15-0.16/kWh. For larger colocation providers and hyperscale companies who are building entire campuses, land availability and cost needs to be accounted for. In markets like Dallas and Phoenix, there is virtually unlimited land in every direction. In markets like Northern California, Northern Virginia, or Chicago, natural barriers like bodies of water or heightened demand make land acquisition more difficult. The market’s climate can impact the cost as well. In cooler markets, you can use the cool air outside to cool servers instead of air conditioning units. This can help keep power consumption costs down. In warmer markets, summers can have higher power costs due to peaks in demand. Most states offer tax incentives tailored to data center development in order to attract end-users. Larger data center investments can be eligible for tax credits based on the total development investment or receive exemptions from sales tax on equipment. A market’s competitive landscape and demand profile also impact lease rates. Heavy competition and/or an oversupply in a market may lower the amount data center providers can charge. This is what we're seeing in the Dallas and Chicago data center markets right now. Conversely, a smaller number of operators or lower supply in a market can enable providers to charge a higher rate. Hazards A data center’s location can also be influenced by geographical hazards. Natural hazards like earthquakes or hurricanes are important to consider when performing a site evaluation. Markets like Phoenix and Chicago are relatively safe from natural hazards. New Orleans and Orlando are examples of markets that have historically deterred data center development. Even with natural hazards, some markets are so strategic that providers build there anyway. In order to do so, they may need to make a larger investment to beef up the building’s physical infrastructure. For example, Northern California, Los Angeles, and Seattle are areas of high seismic risk but are also three areas of substantial data center investment. To account for natural hazards, data centers can be designed to absorb earthquake vibrations or withstand winds of 150+ mph. Man-made hazards also have an influence on a data center’s location within a market. The proximity to railroads, highways, airports, and nuclear power plants are often considered when selecting a data center location.