State of Multi-Tenant Data Center Leasing in Atlanta: Booming Tech Industry, Distributed Deployment, Over-Supplied Neighbors Keeping Peach City On its Toes
ATLANTA, GA — In the infancy of the data center space, deals were 1-2 megawatts. But with the advocacy of hyperscale and the Cloud, deals have become larger and more complex. So CAPRE’s Fourth Annual Data Center & Cloud Infrastructure Summit dove into the who, what, why and where with the panel “State of Multi-Tenant Data Center Leasing: Best Practices for Brokers, Marketers, and Attorneys as Deals Grow in Size and Complexity.”
The discussion kicked off with a question by CAPRE’s Founder & CEO, Brian Klebash, asking his panelists to zoom into the Peach City. “In Atlanta, is a certain type of deal taking place?” he asked. “What makes this region unique in terms of leasing, when it comes to clients or deals?”
First to respond was Mike Lash, Senior Associate at CBRE, who also gave the keynote presentation earlier in the morning. “Well deals are getting larger, but also not getting larger. By that, I mean that these enterprises might come to us and say they want to take their two megawatts and diversifying them,” he replied.
“So they might put 1 megawatt on the West Coast and 1 megawatt on the East Coast, rather than put them both on the same coast. The total deployment is staying the same, but where it’s deployed makes them a smaller deal,” Lash continued. “Historically, if we have a big bank, they might do a megawatt here, a megawatt in Northern Virginia, or they might even want four 500 KW sites, to get that vendor and city diversity. The total spend is still there, but there are smaller deployments in each region.”
Next, co-panelist Brandon Peccoralo, General Manager at DataBank, Ltd, chimed in to provide a bird’s eye view of Atlanta’s demand drivers in the data center space. “Atlanta is growing, obviously. There’s an influx of companies growing in midtown, in particularly tech companies. It’s bringing talent and need,” he posited.
According to Peccoralo, Atlanta is finding its own little niche – it’s not trying to be the next Bay Area or the next Ashburn, but something unique to the U.S. and the world. “You’ve got 56 Marietta, the NAP or the Ashburn of the Southeast. You’ve got exquisite connectivity, a ton of resources inside the IT labor pool, and all of these tech companies moving in,” he listed.i
“That requires infrastructure. Being in the SMB market, we have a lot of customers doing innovation, software development, open source, cybersecurity. Cybersecurity is massive here. We are seeing these project after immediately opening our doors. I don’t have a massive place for the likes of Facebook or Uber, but if you look around here, technology is following that human demand,” Lash concluded.
Tim Langan, Regional Vice-President at Flexential also had some thoughts to provide, sharing observations from a recent expansion in Alpharetta. “We expect 40% of it to fill with companies who are headquartered west of the Mississippi River. Most of the rest will be within 30 miles of the data center,” he predicted. “If you look at the data centers here, leases resemble services agreements more than they resemble real estate leases like you might find in Ashburn and Dallas. Companies here are looking for more services to go with their deployments, rather than just a technology landlord. That’s something that is noticeable about the Atlanta market.”
Soon after this discussion, Klebash asked the panel to zoom out a bit. “What market is the most competitive threat to the Carolinas?” he posed.
Lash responded first, followed by Ron Vokoun, Project Director for Data Centers at FLUOR. It’s a different story moving forward but historically it’s been Dallas,” replied Lash. “We’ve had an inventory issue as far as the amount and variety of vendors in Atlanta has been smaller compared to Dallas and Northern Virginia. If a client passes over Atlanta, they’re going to go to one of those. What’s interesting is that we’re seeing a lot of traction in Arizona, over Northern Virginia as well.”
By Lash’s estimates, that is changing because of a false notion that there wasn’t enough sophistication in Atlanta. “They wanted to see a list of name brands,” he recalled. “With some new providers in town, expansions happening downtown and in suburban areas, we’ll have a different competitive threat. There’s a bit of desperation happening in Dallas. Atlanta has lost deals because of that.” Lash then shared that Phoenix is also creeping up on the national market as it is a “natural fallback” to California.
Vokoun then concurred with Lush’s sentiment regarding Dallas. “Dallas has such a glut of capacity right now. They have 23% capacity – 60 something megawatts available…” he remarked. “Once your vacancy gets above 20%, people start to sweat. We’re anecdotally seeing that in Dallas and Northern Virginia.”
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