Data Centers: The Shift in Demand to Secondary Markets

Downtown Minneapolis, Minnesota

[Courtesy of Capacity Magazine]

In the course of the past year or so, there has been a rather seismic shift of data centers being located primarily in tier 1 cities such as New York, Los Angeles and Ashburn, Virginia, to tier 2 or tier 3 cities across the US as well as international markets abroad.

Let’s consider Minneapolis, a city that covers 58.4 square miles and is considered the 48th largest city in the United States. On March 18, DataBank, a provider of data center colocation solutions, announced the acquisition of a local colocation company, VeriSpace, along with its 10,000 square foot facility.

Amongst other providers in the market is Cologix, which owns and operates Minnesota’s premier network-neutral interconnection and colocation facility. It is also host to the Midwest Internet Cooperative Exchange (MICE), a non-profit, carrier-neutral, layer 2 regional Internet exchange that provides for an open IP exchange among its members. Cologix provides MICE with space, power and direct connectivity to 70+ networks that interconnect to the core switch collocated in Cologix’s downtown Minneapolis data center. But this is just a tip of the iceberg.

In the past couple of months, key data center and colocation expansions have reached a number of markets – as you can see, most of these are considered secondary or tertiary markets:

Chicago, Illinois, US – Ascent
Houston, Texas, US – CyrusOne
Slough, UK – Savvis
Singapore – Pacnet
Singapore – Citrix
Beijing, China – Chengdu Dr Peng Telecom Media Group Co., Ltd.
Austin, Texas, US – OnRamp
Dallas, Texas, US– Cologix
Australia – Rackspace
Dallas-Fort Worth, Texas, US – QTS
North Carolina, US– Red Hat
Seattle, Washington – Equinix

What is driving the interest to locate beyond the major cities? The answer is a variety of factors.

However, according to a report published by 451 Research, the cost of energy is a key factor for deciding the location of a data center. According to the report, the booming US shale gas industry is creating a competitive market for those who traditionally have high energy bills. Data illustrated in the report outlines that a medium-sized, 2MW data center in the US could cost more than 50% less in the US than a comparable facility located in the UK, and even more than a facility located in Germany.

Because of the huge differentiation in energy costs not only from country to country but market to market throughout the US, locating your data center in the right market could save you millions of dollars in operating expenses over the life of a facility.

Furthermore, with cloud computing proliferating the market and continuing to change the way businesses and consumers access and store data, proximity is not as important as it used to be. Couple that with increased network capacity, such as TeliaSonera International Carrier’s announcement that it now providers 100Gbps of bandwidth across both Europe and the US with additional capabilities that consider latency as a key factor in its underlying assets, and it is clear to see that access to traditionally under-utilized markets is expanding. Now, from the comfort of your own home, you can access your company’s primary application platform that could be located hundreds or thousands of miles away without experiencing any noticeable delays.

In essence, businesses and consumers alike are changing the way they access and interact with data of all types (email, video, content, storage, back-up, and more). The need for your gear to be next to you is no longer a necessity. The cost to access and store information – as more and more of it is developed – is forcing the industry to see beyond their own footprints.

Exploring cost-savings and smarter ideas to manage the continued demand for access to more and more bits is now essential to smart business all around.


About Five 9s Digital, LLC

Five 9s Digital is a data center real estate company offering data center development, investment sales, real estate advisory, and colocation and wholesale data center selection and procurement services. Five 9s Digital has been involved in the development and ownership of multiple mission critical facilities from single user build-to-suit facilities to multi-tenant data centers. Five 9s Digital brings a wealth of experience, background and expertise in providing solutions to the data center arena. Due to the specific and yet evolving requirements of mission critical end users in today’s world, Five 9s Digital is able to offer real solutions, real facilities, and real choices due its extensive and up-to-date knowledge base. Five 9s Digital is a Best Data Sites Certification Alliance™ member.
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