Outsourced IT services are fueling demand for data center space in Atlanta
Operational excellence, resource management and risk mitigation rank as critical issues for any business, particularly in the manufacturing sector where firms are taking an increasingly active role in managing these aspects.
The dot-com crash in 2000 and the financial crisis of 2008 did a lot of damage to the commercial real estate market — in many cities. But these economic disasters also presented great opportunity as tenants and owners picked themselves up and searched for silver linings.
For example, the tech market collapse flooded some markets with surpluses of data center buildings and space. Then, the Great Recession forced companies to get smarter about how they spent capital. Outsourcing data center and IT needs became an attractive option as companies soon realized that maintaining expensive infrastructure was no longer necessary while also gaining future flexibility for future needs. This combination of providers offering colocation services and users with a need who no longer desired to operate their own data centers created the modern-day outsourced data center market.
Emerging demands for outsourced data centers
Few real estate firms were paying attention to this emerging area, but JLL Atlanta saw its potential and began to develop into one of only a few global firms with an established group that focuses on this industry.
Getting in on the ground floor of the data center market has helped JLL give our region an advantage among comparable markets.
By the year-end of 2018, Atlanta absorbed 4.0 megawatts (MW) of data center power into a total of 219 MW for data centers. Following Atlanta was Los Angeles, which absorbed 2.0 MW, and New York, which absorbed 1.2 MW. Atlanta’s absorption by mid-2018 was already 40 percent of the MW the market absorbed in all of 2017.
Atlanta was also nearly on par with cities such as New York and Chicago when ranked by megawatts under construction in the first six months of last year.
Right now, our region has about 2 million square feet of wholesale data center inventory. We’re seeing a lot of new growth in 2019, and that number will continue to grow over the foreseeable future.
New space on deck is colocation space
Driven primarily by demand from cloud providers, new colocation operations are coming to the market. These are specialized facilities that provide power and mechanical redundancies and fiber connectivity to users who outsource their data center management and require 24x7 undisrupted operations. In addition to Ascent entering the market in 2017, providers such as zColo, DataBank, and EdgeConneX have all delivered new colocation facilities in Metro Atlanta in 2018. Flexential and Switch are expected to deliver new colocation product in 2019 and other existing providers are considering expansion plans.
Colocation is expanding as IT infrastructure continues to gain efficiencies (think, the ever-shrinking microchip). Packing more equipment under one roof requires increased power density and cooling capacity, making site selection a complex process.
Outsourced data centers help lower operational costs
Today, outsourcing data center needs is a logical next step for many tech companies. It relieves these companies of several cost burdens — including paying for full-time technical expertise and managing infrastructure with specific requirements. Since colocation providers divide the operational costs among many users, it’s a less expensive and more flexible option.
Every day brings something new in this fast-changing tech sector, and we appreciate the opportunity to help our customers navigate it.
Download JLL’s Data Center Outlook Report to learn more about trends in the data center industry.