Southwest Data Center Market 360: Phoenix Insiders Say “You Have to Have a Blend. You have to Have Lots of Carriers.”
by Josh Anderson
PHOENIX, AZ — At CapRE’s recent Southwest Data Center Summit in Phoenix on November 2, we convened a group of Southwest data center insiders for a panel called Southwest Data CenterMarket 360: A Big Picture Overview, and Making Sense of Recent M&A Activity, the Ins-and-Outs of Deals, and What it Means for the Industry. Below is one part of a transcription of this round-table discussion, moderated by Miles Loo, Global Lead, Valuation & Advisory, Data Center Consulting Group, Newmark Knight Frank
Loo: It seems like renewable energy is one key factor that goes into the site selection process, but what are some other key factors?
Alan Kierman, SVP, Finance & Administration, IO: How big is the feed from the street? Market incentives, utility rates, fiber, water, not being on a flood plain. Apparently California has some different issues like fires, landslides, their legislative group.
Loo: And you mentioned connectivity. How important is the number of carriers to a site to a building?
Ian McClarty, President, phoenixNAP: For our client base, you’re starting to see more cloud providers, and that’s very important.
Loo: Do retail and wholesale providers have a different connectivity offering? What do users want?
McClarty: Well we have two different types. We have customers that want more bandwidth from us so we offer them a global network. Then we have midmarket enterprise customers that are very much about running their own multiple – fiber providers, carrier providers. Then we have a lot of international clients in our facility now. We’re also seeing a move from Asia PAC providers come in.
Kierman: They’re leaving California. From a retail perspective, absolutely. You have to have a blend. You have to have lots of carriers. What’s happening more in the wholesale space is how many 100 gig circuits can I get delivered here? How much bulk fiber can I get here? Can I get dark fiber? Those are the conversations we tend to have at the wholesale level, vs at the retail level. And we do have a retail player that has several carriers in it. But from our perspective, working with Zayo at some other players, just to get 100 gig circuits delivered. It’s funny when you ask for them, people say sure, when do you want them?
Loo: Let’s talk about the market. JLL recently released a report showing the most absorption occurring in the first half of the year happening in Northern Virginia, Dallas, and Chicago. Phoenix was on the bottom of the list. Is there any reason why there has been so little absorption in the first half of 2017?
Greg Davit, Vice President, Aligned Data Centers: There hasn’t been enough inventory. Just going along with ourselves in May, June, that’s when we start leasing, and we’re leasing quickly. Outside of that, the only other vendor in town that has had space was Cyrus One, and they leased it up. So the question is how much was reported. That’s the other thing too. They can get what they get, but Virginia is easier just because there is so much going on right now.