Millennials are Arriving, Enterprises are Done Leaving, and Investors are Buzzing about Atlanta’s Data Center Market | CAPRE Exclusive with CBRE’s Mike Lash

ATLANTA, GA – CAPRE’s Fourth Annual Greater Atlanta Data Center & Cloud Infrastructure Summit kicked off with “State of the Greater Atlanta Data Center Market,” by Mike Lash, Senior Associate at CBRE Data Center Solutions, a firm which manages 80 Million square feet of raised floor space within enterprise, colocation and hyperscale data centers.

In this keynote, Lash offered a lay of the land of the data center industry, both nationally and locally to Atlanta to illustrate that data centers aren‘t going anywhere, but who owns them and how they’re being constructed is changing. For example, in 2017, about 77% of data centers were on-premise, but Lash shared how that number is expected to shift to around 40% by 2022.

“So there’s a huge shift from enterprise into what we call third-party data centers, and what’s what we’re trying to track,” he remarked, divulging further that some are even predicting that when it finally ends, the number of enterprises with on-premise data centers will be in the single digits. “That being said, we’re also tracking the growth of data centers. our sector is growing by 28% year over year, compounded annually. That is a staggering number, if you think about how many billions of dollars are currently in the data center business.”

So what is growing the most, between retail data centers, wholesale data centers, and hyperscale? “Hyperscale is growing at an incredible click, at about 48% year over year compounded annually. That number alone is almost unbelievable to think about – the number of hyperscale data centers being built,” Lash exclaimed. However, there is also growth within wholesale and retail colocation as well. Retail is growing around 18% and wholesale is growing around 20% year over year as well. According to Lash that’s changing the perception of the industry.

Mike Lash, Senior Associate, CBRE Data Center Solutions

“A lot of new investors are coming into our industry. They’re starting to look at us as more mature industry. There is now enough information for some of the institutional investors to invest in data centers, and they’re looking at us like this established business,” he outlined. “If you track any of the major public REITs, they’re now a class of their own, and therefore are now a lot more mature than they were before.”

Next Lash moved onto talking about Atlanta. “Atlanta is doing really, really well,” he beamed. “We have great tax incentives and a great cost of living. We’re attracting millennials and we’re growing at an incredible click. Just in Midtown alone, in the last two years and the next two years, the population will double – from 500,000 to a million. You probably notice that when you’re driving. It’s pretty unbelievable. And at CBRE, we track that. Office leases are up, that’s very steady. We’re in a very cyclical business, and it doesn’t seem to be on a downturn just yet.”

Lash then offered a look into a distinct, but related industry – ecommerce distribution and industrial. “Industrial is doing incredible – think of distribution. Just as data centers are getting bigger, so are industrial boxes. Home Depot, Amazon, UPS are all building major hubs here in the Metro Atlanta area, and there is about 15 Million square feet of industrial boxes under construction today,” Lash explained. “Maybe [there will be] some adaptive re-use data centers down the road.”

Lash then segued into sharing some fundamentals of the Peach City’s data center arena. “What is interesting about Atlanta is that it’s a primary market, but it’s a smaller primary market. So one or two major drivers could really shift and affect the absorption rate,” he remarked. “In 2018 we had a pretty decent year, with 8.2 megawatts of wholesale absorption. Thich doesn’t count retail (but that is also a larger number). What’s really interesting is that if you look at what happened in 2017, that’s a 447% increase in data center net absorption. That’s a little bit of a shocking number, but investors look at net absorption, not gross absorption, and that’s created some buzz in Atlanta.”

However, Lash wrapped up his take on Atlanta with a bit of a disclaimer. “I will say candidly that in 2017 there was a shift,” he intimated. “Some enterprise, some colocation left Atlanta to go to other primary markets, primary Dallas and Northern Virginia. But that seems to be stopping now. We don’t have the numbers yet, but the absorption rate will be decent as well. We’re probably tacking right around 8 MW in 2019, if not a little lower. Since nothing is leaving, and Atlanta is just growing, that’s what makes Atlanta exciting.”

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