Rich Miller, Data Center Frontier on NoVA: Should Prepare for Landbanking. Going Vertical & Instant Greenfields
DULLES, VA – CapRE takes pride in its many industry partners, who are similarly dedicated to driving the national conversation in the data center arena. And CapRE’s recent 2019 Data Center & Cloud Infrastructure Forecast East was the perfect venue to capitalize on one such partnership. That’s why CapRE invited Rich Miller, Founder & Editor of Data Center Frontier to provide brief remarks at the summit, dubbed DCF Northern Virginia Data Center Market Special Report. Below is a snippet of that session, continuing on a previous CapRE Insider Report, titled Rich Miller, Data Center Frontier: “New Money Loves Ashburn”
“When it comes to innovation in the data center sector, many of the things that are defining the shift to hyperscale happen first here in Ashburn,” began Miller. “Driving down the cost per megawatt [for example]. The speed to market, in particular. When we first saw a Dirt-to-25-Megawatt data center deployed in six months, that happened here. It’s not an accident, with the demand that we have, that these trends are being pioneered and perfected here, and then moving out into other areas of the market.
Next, Miller referenced a previous keynote – by Allen Tucker, Managing Director at JLL, who had mentioned a phenomenon known as “land banking.” However, Miller has a more contemporary term for it .”We think of that with the acronym “FOMO.” That stands for Fear of Missing Out,” he chuckled. “When you don’t see an end to the demand, it changes how you think about your requirements. And that’s why we’re seeing larger pieces of land being bought. Everybody is looking for a longer time horizon, figuring that you’re not going to run out of demand an you’re not going to run out of capacity.”
“It’s much better to do it in big chunks now than to have to incrementally be able to acquire new sites for new projects,” continued Miller. “And of course that’s playing into the land grab that’s been going on and the pricing that we’re seeing on real estate in Ashburn. When demand is very forward-looking, everybody wants to get ahead of it. Nobody wants to be left out.”
Another trend Miller pointed out was going vertical. “Actually, we’ve seen that in other markets first – some of the hyperscalers adopted that,” he shared. “Google started doing three- and four-story buildings. There have been some good stories lately, specific to the Ashburn market, on that, and we wrote about that out of the 7×24 event earlier. The sweet spot is between 2 and 3 stories, on the economics and the bank for buck on the land.”
“One of the big stories this year will be executing despite shortages of labor and in the supply chain,” segued Miller. “With the kind of demand on large projects that we have there, this is going to be an increasingly important imperative this year. Managing labor to be able to meet these requirements, working with the supply chain and equipment makers on long-lead time equipment. The interesting thing is that I’ve had a lot of conversations with providers in the last six months. And the word that keeps jumping out is relationships – that in some ways this is still kind of a small industry. People know one another and have know them for a long time. When it comes to the contractors that are building these facilities, that’s going to be critically important.”
“The final bullet point is about what’s coming soon – knockdowns,” he predicted. “Instant-greenfields as we call them. This is something that we see in land-constrained markets, particularly in Santa Clara and Silicon Valley. Because it does have cheaper power than in the surrounding PG&E area. Everyone wants to be in Santa Clara to have the lower power and therefore they will pay more, a premium for an existing building, to knock it down and put a new data center there. that’s the default mode there and I think we will start to se more of that, particularly in the areas that are close to the heart of Data Center Alley.”
“I wouldn’t be surprised if there are people in this room who are getting to know the landlords of some of the industrial properties in that area and thinking about what’s going to happen with some of those going forward,” mused Miller.
Stay tuned to future CapRE Insider Reports for more from Miller on the Northern Virginia Data Center Arena.