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John Sabey Discusses New York Data Center Market: Not Awesome Now, But Will Be Worth Investment

 
Nov 30, 2017
by Josh Anderson

SEATTLE, WA — As CEO of Sabey Corporation (Sabey), John Sabey oversees acquisition and development for the commercial real estate portfolio comprising primarily office and medical technology space, consisting of approximately 5.4 million square feet developed, owned and managed by Sabey. Sabe y has long developed specialty technology properties for the medical/life sciences, communications, government, and military sectors. As Big Data emerges as an essential component of medical research breakthroughs, the company’s leadership has been quick to realize their critical reliance on robust, highly reliable data centers. At CapRE’s Seattle and Pacific Northwest Data Center Summit, John participated in a up-close Q&A about his firm’s latest activity and his outlook on the data center space, moderated by CEO of CapRE Brian Klebash. Below is one of many Insider Reports about this riveting Q&A.

John Sabey, Sabey Corporation

SEATTLE, WA — As CEO of Sabey Corporation (Sabey), John Sabey oversees acquisition and development for the commercial real estate portfolio comprising primarily office and medical technology space, consisting of approximately 5.4 million square feet developed, owned and managed by Sabey. Sabey has long developed specialty technology properties for the medical/life sciences, communications, government, and military sectors. At CapRE’s Seattle and Pacific Northwest Data Center Summit, John participated in a up-close Q&A about his firm’s latest activity and his outlook on the data center space, moderated by CEO of CapRE Brian Klebash, who wanted to hear Sabey’s thoughts on the New York data center market. Is it seeing a rebound, he asked.

Not really,” replied Sabey. “That’s a challenged market. We obviously bought an asset there awhile ago, and we started building data center space, but we actually changed strategy. It’s now a mixed-use building where we’ve got office space on the top of it, because I don’t think the data center market didn’t materialize the way we thought it was going to. There are still lots of users in the New York and New Jersey metro market.”

But that market, because of the price of land and regulations, is one of the few pockets in the United States where the rental rates are higher than the rest of the U.S., Sabey explained. “And it’s so relatively close to Ashburn, that once you decide you can get off the island, you don’t need to go to New Jersey,” he advised. “If you can get off the island, go to Ashburn. Because you’re going to save on taxes, you’re going to pay one third the electricity rate, you’re going to be in a safer environment. And all of the reasons that everybody picks Ashburn, it makes sense to do that.”

According to Sabey, there has been some activity in that marketplace, but what will change the game is big data. “The stuff that is coming along on the healthcare side. The autonomous cars, and a lot of the entertainment stuff,” he offered. “What I believe that the New York market will benefit from – and we’re still probably a bit early on that – is the huge amount of real time data that will be necessary for these things like autonomous cars, healthcare work, and streaming video that is going on.”

“Obviously with New York being the most densely populated area in the US, if you’re trying to serve that market with a really high quality, low latency product, that is when the demand in that marketplace will probably begin to materialize,” he continued. “It does probably 4 megawatts a year in that marketplace so we all beat out brains out for 4 megawatts in a population of 20 million people. But it hangs in there. It’s not awesome, it’s not bad.”

Next, Klebash asked if Sabey would stay in New York. “We’ll definitely stay there,” replied Sabey. “We already did all of the hard work. We already bought the building and spend all the money and did all of the construction. What I love about it, is it’s a former Verizon Switch building at the base of the Brooklyn Bridge. And quite honestly you’d never be able to build that building again in a million lifetimes and build that infrastructure and get it for anything on a cost basis that would make any sense. So I don’t want to get rid of it, because I think that infrastructure will have value in the NY metro area over my lifetime.”

Sabey also believes that eventually his firm should be able to make a lot of money off that asset. “While today it’s a grind, and we’re making 10 cents, it allows us to keep grinding along and offer the product type there,” he explained. “The other thing is that there are not a lot of tall buildings around us. So we have a lot of line-of-sight visibility. As there becomes more line-of-sight visibility, that building will continue to have value and into the Tri-State region as well. So we’re going to hang onto it and I think that ultimately it will turn out to be a good data center.”

Be sure to check out the previous installments of this Q&A with John Sabey:

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