"The suburban trend is taking off for web hosting and co-location space," says Chris Epstein, president of DataCentersNow, which just announced a 110,000-sf O'Hare high-tech warehouse conversion. "Over the next year, suburban markets nationwide, especially those located near airports, will become the primary focus of telecommunications and data center development."
Bob Hebbeler, US director of co-location at Band-X, the online telecom capacity exchange, says that the continuing fashion for city-center co-location development is petering out. "Eventually someone is going to need a big chuck of co-location space, and they are going to have to move out to the suburbs," he says.
The trend in Europe, according to Band-X, has been to locate in outlying industrial areas, resulting in facility sizes four times those of the average US co-location site. Correspondingly, European co-location prices posted on Band-X, at an average of $726 per rack per month, are 20% lower than in the US
Epstein says that the move to the airport area market is just in its infancy in Chicago, especially compared to markets like New York, Northern Virginia and San Francisco. "That's why we chose Chicago first for expansion," says Epstein. In addition to the O'Hare area "CyberFortress" that DataCentersNow expects to have complete by December, the firm will be acquiring 14 acres directly across the street where it expects to build a 200,000-sf facility. The firm has also purchased an additional 16 acres nearby.
DataCentersNow's business model is completely different from most other telecommunications and data center developers in that it seeks to provide a turnkey solution for tenants. While most developments provide raw space only, DataCentersNow provides the hundreds of dollars per square foot of investment that is usually made by the telecommunications or data center tenant. Under its model, the real estate expense, and risk, is taken off the increasingly cash-strapped telcom balance sheet.
However, it's a tremendous balance sheet risk for DataCentersNow itself to make this investment, but it's a risk that Epstein says it is willing to bear because the company sees tremendous need for the turnkey-type service in the marketplace. DataCentersNow says it is in the planning stages for $375 million worth of developments in six markets, deals that Epstein hopes will be finalized by the second quarter of next year.
At the O'Hare tech corridor, it was industrial developer CenterPoint Properties that got the ball rolling early this fall with a big project for Exodus Communications. Focal Communications followed soon after with a dedicated facility. DataCentersNow is the latest firm to announce plans in the area.
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