Giant hard drive in the sky

October 14, 2015 admin

Cloud BalloonsMost of us have figured out “the cloud” is not a “giant hard drive in the sky.” So where does all that data go? Where is it stored? It is stored in massive data centers — which typically house tens of thousands of servers — located around the world, of course.

The advantage of the cloud is you can access your information on any device with an Internet connection. Remote servers handle much of the computing and storage, so users don’t need to invest in additional hardware.

The migration of data and information storage to the cloud and the growing movement of business processing to a cloud-based model have brought data centers into the real estate spotlight.

Cisco forecasts that global data center traffic will triple by 2017 to 7.7 zettabytes, a compound annual growth rate of 25 percent. (A zettabyte is equal to 1 sextillion bytes, or approximately 1,000 exabytes.) If you are in real estate, the only thing you need to understand is the demand for data center space will be skyrocketing. And not just in the United States, but around the world.

Prominent U.S. data center markets include Northern Virginia, New York–New Jersey, Silicon Valley, Phoenix, Atlanta, Chicago and Dallas–Fort Worth. And there are a number of other emerging markets, such as Miami, Houston, Denver and Las Vegas. Construction of the largest data center in the world — a planned $3 billion, 6.5 million-square-foot campus in Reno, Nev. — was announced earlier this year by colocation specialist Switch. To give you an idea of the size of the planned campus, if you’ve ever been to the sprawling Mall of America in Bloomington, Minn., it totals only 4.87 million square feet of gross building area. Reportedly, eBay already has signed on as an anchor tenant at the planned SuperNAP data center in Reno.

Revenues generated by North American data centers are expected to grow 32 percent from 2014 to 2016 to $14.8 billion, according to 451 Research. Illustrative of the trend, several data center REITs have been among the industry’s top performers during the past 12 months. CoreSite Realty Corp., for example, reported year-over-year data center revenue growth of 24.7 percent as of June 30, 2015, while QTS Realty Trust reported a year-over-year jump in total revenues of 32.7 percent.

The bottom line: In the coming years, as use of the Internet continues to explode and users require more cloud capacity, the demand for data centers will remain strong.

Not a subscriber to IREI Insights blog? Sign up to receive alerts on new blog posts.

LarryFinalwebv2Larry Gray is editorial director of Institutional Real Estate, Inc.

Previous Article
Best cities for millennials
Best cities for millennials

As a millennial, any time I see an article with a title “best ____ for millennials,” I click on it. Recentl...

Next Article
Emerging trends
Emerging trends

Gateway real estate markets such as New York City and San Francisco are losing investor interest in favor o...