GlobeSt.com: Why did Grubb create a data center practice?
Kerrigan: Grubb & Ellis recognized the need for data center space is not going away. In fact, it's only going to get larger. So they decided it was time to sharpen the focus on this sector to meet their clients' needs.
:GlobeSt.com: Is demand for data centers growing that fast?
Kerrigan: Our clients keep generating more and more data, and they need to store it somewhere. I'd say right now there's a surplus of data centers in the country, but probably by next summer, there will be a limited supply because there aren't many new ones being developed. The credit crunch is affecting everyone, and it's no different for data centers. But where other types of users can usually shift around a bit, use a retail shell for warehousing or flex space for offices or squeeze a few more people into an existing configuration, data centers have very specific requirements that can't be accommodated in ordinary space. A building has to be either built or rebuilt with very specific characteristics.
GlobeSt.com: What are those characteristics?
Kerrigan: An ideal data center has about 200,000 sf of space with 20-foot to 24-foot ceiling clear and decent clear between columns. But it's not just the shell that matters. It's what goes into the shell. And it's also location. Probably the number one thing is access to an abundant amount of power. Reliable power. For example, one of our clients is 365 Main (a San Francisco-based data center owner and operator) and PG&E (Northern California's largest utility company) has rolling blackouts all the time. Their generators would go down on a regular basis. But one of the most important things for data centers is that generators don't go down, so they had to install very expensive backup generators. Ideally you don't want to have to do that.
GlobeSt.com: Most facilities from the dot-com era seemed to have been built in existing buildings. Is that still the case?
Kerrigan: I don't know if there's necessarily a particular building type that makes sense. In markets like Dallas with lots of land, why not build new? It's cheaper and easier. But in places like San Francisco or Chicago or New York, you don't necessarily have that option and you may have to retrofit an existing building. But some of the challenges with existing buildings is the ratio between raised floors and ceilings may be difficult to achieve. In the past you typically had 25% of the space beneath the floor and 75%. Now the ratio is closer to 50-50 because of the amount of cooling needed, but it's hard to change that ratio in existing buildings.
GlobeSt.com: With technology evolving so rapidly, can real estate keep up?
Kerrigan: It hasn't. Most of the existing data centers were built around 2000. Then the blade server was introduced in 2002 and became prevalent in 2004 or '05. It required a lot more power and more advanced systems to keep it going. Those built prior to 2004 are antiquated. Those built today may be antiquated a few years from now.
Look for the second part of this interview next on GlobeSt.com's industrial page next week.
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