What Industries Are Driving Data Center Activity?

Darren Eades, EVP at JLL

Part 1 of 3 LOS ANGELES—“The majority of activity in the Los Angeles market is organic growth from technology, gaming and media companies.” That is according to Darren Eades , EVP at JLL , based in L.A. We asked Eades, among other JLL executives on the West Coast the question of what industries are driving data center activities in their particular market. According to Eades, a lot of activity is also coming from Asian companies looking to enter the market or expand their current presence. Seattle based Conan Lee , managing director, says that demand in the Pacific Northwest’s major data center markets around greater Seattle, central Washington and Hillsboro, Oregon is heavily driven by technology companies. “About 70% of total demand comes from this sector with telecom a distant second at 10% of demand.” Like Eades, Lee adds that there is also increasing interest among Asian corporations—content delivery networks, ecommerce firms and ISPs—looking to establish data centers and routing equipment in the region. In Phoenix, JLL managing director, Mark Bauer, says that “cloud providers are extremely bullish on Phoenix, followed by enterprise users. Together, these players are actively taking down excess capacity in the metro market, including large chunks of space in the 5 to 30MW range. This activity picked up notably in the second quarter with multiple users looking for space and power.” Raul Saavedra, EVP for JLL in San Francisco, says that about one-third of all data center demand is being driven by the Bay Area’s tech-based economy, much of it from cloud computing providers who continue to see a dramatic increase in business. “The total size of the global cloud-managed service market is expected to double by 2021 and, in Silicon Valley, for example, much of the absorption of capacity in the last two years has been from large cloud providers.” Beyond tech, Saavedra says, the banking and financial services sector and retail/ecommerce companies are the biggest current users of data center and collocation space. Lastly, Mark Stratman Jr., an associate in the Denver office of JLL, tells GlobeSt.com that disaster recovery users are the single-most significant drivers of data center space within the Denver and Colorado Springs markets. “Colorado serves as an attractive option for users of this sort given the region’s accessibility to airports and relatively minimal likelihood of natural disasters,” he says. “Additionally, the region’s favorable climate benefits users by way offering plentiful hours of free cooling year-round.” Check back with GlobeSt.com for more on data centers as we chat with the group about the supply/demand dynamic in their market as well as what the future holds in the sector.