What New Players Are Entering the Southeast Data Center Market?
by Josh Anderson
NORTH CHARLESTON, SOUTH CAROLINA – With a red-hot market like the Southeast, you sometimes have to slow down to keep track of the most exciting deals and development going on. So at CAPRE’s 2018 Southeast Data Center Spring Update, Flexential’s Michael Fuhrman, moderator of a panel titled Carolinas Data Center Market 360: An Overview of Regional Development, Site Selection Advantages and Leasing Trend, got right down to business, asking his panelists what new players are entering the southeast, and what impact does that activity have on the competition – in terms of pricing, real estate, or anything else?
We first heard from Aaron Reuther, Vice President of Real Estate Development at Ascent Corp. “Personally, I’m not as up to speed on the Carolinas market, but I focus on Atlanta,” he replied. “In the last year and a half or so, we acquired a new property down there. As that market has kind of unfolded, what we’ve learned is that we really like it. It’s a terrific landscape. It’s got a terrific power story. It’s got a terrific fiber story. And the facility we acquired is fantastic.”
Reuther then shared that from Ascent’s perspective, they’ are in the mix of a bunch of new players coming into the market. “When we first started looking at it, we felt it was kind of an under-served market,” he recalled. “There wasn’t a ton of availability. We really liked what T5 has done out there, in Alpharetta. We like the Alpharetta area.”
“What we’ve seen in the last year, I don’t know if we started a trend of what, but CyrusOne and Switch have come into the market,” pointed out Reuther. “And last August, when we were down there for the CAPRE event, we talked about, why aren’t there any hyperscale folks down here? We’ve got some incentive packages, power is super cheap, land is relatively cheap, and so on and so forth. Lo and behold, we saw Facebook pop up here in the last few months. It’s doing a big project down there as well. So there’s a lot of activity in the Atlanta market. That’s where I spend most of my time, focusing on that.”
We then connected with Bob Kramlich, Vice President for Atlanta at T5 Data Centers about the same topic. He said that, to find the real disruption, you need to look at the big boys. “With Facebook coming, that kind of changes the game in Atlanta,” he said. “Because now it’s seen as, we’ve already had Google, as far as a hyperscale player, and now we’ve got Facebook in the market.”
Kramlich then pointed out how Georgia is just on the verge of passing a data center tax bill. “It will significantly help,” he predicted. “Georgia is one of the few states that didn’t have significant ta advantages for data centers, and so that lowers the playing field for Georgia. And with the entrance of Switch and CyrusOne and T5 as well, we’re going to have supply with Ascent and all of these players now, where Atlanta has been a demanded area but there wasn’t a lot of supply. “
Kramlich then shared how QTS, a venerable competitor, used to be the one winning a lot of deals. “But with all of these providers, it’s going to be the wild west,” he predicted. “And HQ2 is another thing that’s on the verge — I’m sure that Atlanta will be one of the top five cities they consider.”
“If they come to Atlanta, the whole Southeast wins,” he shared. “I think that a rising tide lifts all boats. It’s not just going to be one players that wins. It’s going to be the people who cling onto Facebook or provide them with services. It’s going to be the people who help out Amazon. It’s going to be the people who support data centers in the construction industry. So you’re going to see a lot of economic development here in the next twenty-four months.”
To conclude the discussion, Flexential’s Fuhrman concurred. “We’ve got about 40,000 square feet at Norcross in Alpharetta,” he revealed. “We’re seeing the same trends with respect to supply and demand, even with the new entrants coming in, of course they’re not there yet. The supply’s not there yet. Gut we opened an expansion about two and a half years ago, and just kicked off another expansion project because we’re running out of space. It’s a healthy market, absolutely.”
Check out a previous CapRE Insider Report covering this panel discussion: North Carolina Business Recruitment Manager Talks Data Centers in the Carolinas: Location, Power, Construction Costs Check All the Boxes