Infomart’s John Sheputis on Portland Market: Expect Lumpiness, But Growth Thanks to Labor Base, Vendor Base, Costs Relative to CA

PORTLAND, OR – The Portland data center arena is hot. But that doesn’t mean that anyone can dive into the region and come out on top. So at CapRE’s Second Annual Greater Portland Data Center Summit May 17 kicked off with a pane titled Greater Portland Data Center Market 360: From Hillsboro to Downtown Portland, What Firms are Actively Developing, Investing & Why?

“For those of you who don’t know, John Sheputis, President of Infomart Data Centers just successfully sold his company in an amazingly successful transaction,” offered Conan Lee of JLL Data Center Solutions, referring to one of his panelists. “John, can you say anything about what you saw from Hillsboro’s perspective in terms of supply and demand, since IPI is one of the major operators here?”

data center summit“We operate in four markets. There’s Dallas, the namesake of the company. We originally were Fortune Data Centers but came it Hillsboro in 2012, Opus Interactive was one of our first clients,” recalled Sheputis. “But looking at Hillsboro, the amount of IT demand in the country is growing. Work loads are being automated. The amount of data is going up. We can debate about how fast, how quick, and certain terms are already going out of style. If you had this panel three years ago, you’d be talking about big data. Well, today’s data is a lot bigger than that. So I guess we’re in the age of really, really, big data. And if you look into the future, today will probably be small data.”

John Sheputis,President, Infomart Data Centers

According to Sheputis, the amount of IT workloads that are being automated is something that the arena will see demand consolidate around. “And I think that Cloud is forcing that to happen even faster. Because there are network effects that help companies like Google and Amazon and Microsoft and other folks,” he predicted. “These guys are growing their Clouds something like 50% compound growth per year. If you’re growing 35% year on year, that sounds great. For all of you commercial people in the room, that sounds like a good year. But if you’re in the Cloud business – you lost share. And that matters in this business.”

In other word, Sheputis sees demand growing. “This market competes with a ring of markets that circle California. That’s no secret, California is expensive to develop. Taxes are high and land costs are high. Labor is restrictive. There’s a lot of anti-development sentiment. So it’s no secret that it’s cheaper to put your capital-intensive investments outside of California. We see this market as growing.”

However, it won’t grow in a straight line. “In a year it’s going to be lumpy,” he predicted. “And I don’t see that changing because when you win a LinkedIn-like demand, and you have a spike, it’s going to be lumpy. I still think that the fundamentals of this market are outstanding. To get to our transaction, outside of the Dallas property, which was purchased by Equinix, the biggest of our three properties outside of California was this property.”

Sheputis then shared that his team developed the asset in Portland  for a number of reasons. “The labor base is excellent. The vendor base is excellent. The semi-conductor business has a variety of skills that are very applicable and portable for the data center business,” he listed. “So the skills are here and the costs relative to California are lower. Taxes are lower. I think that Hillsboro and Oregon in particular are very balanced approach toward development, which is sustainable yet still supportive of development. And so, while I expect the forecast of demand to be funky, because the orders are bigger, I expect it to be good. And for me and my company, this is the jewel of our company. And we’re super proud of it.”

For more on the latest activity in the Greater Portland data center market, check out a previous CapRE Insider Report: Portland Market 360: Look out for Non-Traditional “Hot Spots” in Oregon