Colorado Real Estate Journal - December 3, 2014
Cisco recently released its 2015 projections, which included the following: • Data center traffic to nearly triple on the back of cloud growth in the next five years to 8.6 zettabytes annually by 2018. • Traffic will grow with a compound annual growth rate (CAGR) of 23 percent, the report forecasted. This traffic is equivalent to streaming all the movies (around half a million) and TV shows (3 million) ever made 250,000 times. A recent report by International Data Corporation predicts public cloud revenue to reach more than $127 billion in the same time frame. Cisco’s annual overall traffic growth is in the same ballpark as IDC’s annual cloud growth rate at 23 percent. This is compelling information that clearly indicates a growing need for high-quality, well-connected data center infrastructure. The Rocky Mountain region continues to see the results of this growing demand with projects like Microsoft and Green House Data in Cheyenne, Viawest, TDS Telecom (OneNeck), Edgeconnex and Time Warner in Denver as recent examples of data center growth in this market. What is driving this data center demand and how does this region compete? Data creation, as mentioned in the statistics referenced at the start of this piece, continues to grow rapidly. It is predicted that by 2015 there will be 15 billion devices connected to the Internet. The Denver area offers many competitive advantages including: competitive power cost, excellent fiber infrastructure, ideal climate, low risk of disasters and an improving incentive scenario for data center user and occupiers. In a recent report published by CBRE’s Global Research and Consulting, both Denver and Colorado Springs ranked below average among 23 top markets for data center cost on a leased basis with Colorado Springs emerging as one of the most attractive U.S. markets on a cost basis due to low rental rates and the cost of power. What are the risks and opportunities for this region as it pertains to future data center demand? In Denver and the Rocky Mountain region, we are fortunate to have a number of new projects in this area, with respected, high-quality product from national and global providers in the marketplace. Viawest’s new data center is an example of the type of high-quality, cost-competitive data center product that this region needs to retain existing demand as well as attract new demand from outside of the Rocky Mountain region. We expect to see additional builds in 2015 from TDS Telecom and from Edgeconnex that will add to the quality offerings in this area. While the economics remain very positive for Colorado Springs, we are seeing less activity in this area than prior years. We believe this could be due to the general acceptance of third-party owned data centers where corporate clients lease space on an “as needed” basis. This is a trend we are seeing across the country and the globe. Historically Colorado Springs has been a highly attractive market to corporate built and owned data centers and this part of the state may need to reevaluate their approach to continue the momentum they have had in prior years for data center projects. Lastly, and as referenced in the recent CBRE 2015 Forecast event, we see an opportunity in downtown Denver for a possible new carrier hotel facility. This would compete with existing assets in downtown Denver that serve as critical interconnection points for Internet and communication traffic coming to and from the region and heading to all parts of the globe. The growing demand for this space and the lack of available space in the existing assets could warrant an excellent business opportunity for companies focused on this highly technical and very expensive space. CBRE’s Data Center Solutions team has seen fivefold growth in our business serving this unique and very technical industry and need. We are finding our clients embracing the consulting and strategic support we offer to our IT and C-level clients as a tremendous value-add resource as they evaluate the numerous and very complicated decision criteria associated with their current and future data center strategies.