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Boston Data Center Summit Takeaways: Fundamentals Make for a Strong Market, But It’s Still Getting Outpaced

Jul 27, 2018
by Josh Anderson

CAMBRIDGE, MA — Sean Brady, Managing Director at Cushman Wakefield, is a leading voice in the data center industry, and CapRE looked to him for a deep-dive into to some of the key takeaways from the Second Annual Boston and New England Data Center Summit this Spring. Brian Klebash, Founder and CEO of CapRate Events moderated the discussion, below, we highlight one of the foundational questions Klebash asked Brady to tackle.

data center summit“Sean why don’t you give us an overview of what you’re seeing in the Northeast third-party data center market so far in 2018,” suggested Klebash.

“Sure. As it relates to the market itself, when you look at New England, it’s not easily made up of Maine, New Hampshire, Vermont Massachusetts, Eastern New York, Rhode Island and Connecticut, within that region, it’s considered very high-cost,” replied Brady, repeating an often-touted fact of the Boston summit.

“Most of the marketplace, for the colos and wholesale providers, they’re all seeing very small users, ranging from a 50 KW deal and a 120 KW deal,” continued Brady. “The days of seeing more transactions in that marketplace are few and far between. Because the marketplace in the Northeast has got the highest electrical rates in the country. You’ll see rates in states like Arkansas with rates somewhere between nine and fifteen cents per kilowatt.”

The bottom line, according to Brady, is that the data center marketplace is affected by these costs. “We’re not seeing any Cloud or hyperscale providers go to that marketplace because of the cost of power,” he shared. “Large users are those needing 1 megawatt and larger – and chances are they are moving out of that marketplace. I’ll give you an example. The Washington DC marketplace, their electrical rates are about 5 cents per kilowatt-hours. Chicago is 6 cents per kilowatt-hour. Dallas is 4-5 cents per kilowatt-hour. Most of the data centers in the New England region are paying more.”

However, to be clear, the marketplace in New England all-in-all is a good marketplace in terms of fundamentals, asserted Brady. “There is obviously small clients and the Edge and AI will help that marketplace grow, and smaller companies will also help that marketplace grow over time,” he predicted. “Rental rates up in that marketplace, in Boston in particular, if you’re a deal that’s above 250 kilowatt-hours, rental rates are somewhere between 35 and 65 per Kilowatt per month.”

“So the market place is a strong market, the providers who are up here include CoreSite, TierPoint, to name a few. There are about thirteen providers up there,” he concluded, before offering one point of caution. “One thing that happened in the past couple of years is that 5 years ago Boston was probably considered one of the Top 10 Colocation markets in the country. But now, today, there are several markets that have passed it.”

For more takeaways from the Boston Summit, check out previous CapRE Insider Reports:

Banner Photo: Sean Brady, Managing Director at Cushman Wakefield

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