Originally posted on WiredRE Group’s Blog
Written by Lisa Huff

Many other analyst firms claim that demand outstrips supply in the data center co-location market. The fact is that this may be true in some regions, but is absolutely false in others. Gone are the days when telecom and co-location providers say “build it and they will come.” All have taken the modular approach – do NOT build unless you have at least an anchor tenant or more likely, several contracted customers. However, there are still pockets of capacity that were built just before the recession that remain vacant, but this is not true for the Northeast.

Wired Real Estate Group has just finished a new study of the Northeast US market for wholesale/retail hybrid co-location services. Not surprisingly, what drives the Northeast market is the financial sector. In addition, with the advent of the HITECH initiative that requires healthcare facilities to implement and maintain electronic health records, we see the healthcare vertical as a growing market within co-location data centers in the next few years.

Some of the highlights of our analyses are summarized below.

  • Most of the demand remains in NY and NJ.
  • In 2010, the market shrunk by about five-percent from 23MW to 22MW.
  • In 2011, it rebounded and grew more than 150-percent, driven by pent-up demand from the financial sector.
  • The market for 2012 remains strong with expectations of around 30-percent growth.
  • Dupont Fabros Technology, IO Data Centers and Sabey top the list of added capacity with more than 10MW each in 2012.
  • All added capacity has at least one large anchor tenant associated with it, though not all have been announced as of yet.

While the Northeast remains one of the most vibrant markets for co-location services, many enterprises are looking elsewhere in order to minimize ongoing operating costs including energy and taxes. So, secondary markets like DE, PA (part of our Mid-Atlantic study) and NC (part of a future Southeast study) are becoming more attractive.