Data Center Development 1.0: What You Need to Know

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  • Data Center Development 1.0: What You Need to Know
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Paraic Morrissey


Perspective 2022 vol 1
Market Insights

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As a result of the unprecedented reliance on technology required by working, learning, and living from home over the last 18 months (think Zoom meetings, online shopping, instant messaging, playing video games, and more), data centers—facilities that house computing and networking equipment that collects, stores, processes, and distributes large amounts of data—saw record revenues.

Recognizing this demand, new companies are emerging to spearhead the lucrative field of data center development. But as a relatively new typology, there can be a learning curve in navigating both the opportunities and challenges it poses.

To coordinate and map a path to creating a cutting-edge data center, a proven project management team is essential. The value of this will be maximized if they are brought on board at the outset of the development, when their collective experience can be applied to shape projects from the ground up. Market knowledge, procurement insights, cost estimating acumen, expertise in navigating supply chain issues, and whole-life costing experience are all vital skills throughout the planning phase—and beyond.

Data centers are proliferating across the country, in Chicago, Phoenix, Seattle, Virginia, and New Jersey, to name a few locations. Here’s a checklist of the top criteria for developing and designing these specialized facilities:

  • Power. A significant amount of energy is required to keep networks running and maintain an optimal climate for the IT equipment. Comparing local costs per megawatt can yield significant savings. Nearby rivers may also be tapped to help satisfy server cooling needs
  • Fiber. A robust fiber network offers compounding network effects due to improved connectivity, backup resources, and disaster recovery options. Access to redundant fiber optic loops (both land-based and undersea) and hardware that connects the various facilities of a data center is key. Known as “cross connections”, these provide secure and reliable access to businesses and ISPs
  • Supportive government. Pro-data center legislation and policy can ease entry into development. Look for financial incentives (for instance, sales and use tax exemption on servers, generators, chillers, and other server-related equipment; and tax deductions for the costs of recruiting and training new workers) as well as operational ones, such as a fast-track program for issuing construction permits for data centers
  • Qualified workers. Data centers located proximate to metropolitan areas can often benefit from the highly educated population of the region
  • Space to build. Areas with an inventory of commercial land available for development allow for expansion of new and existing facilities
  • Safe location. Geographic areas that typically do not experience extreme weather or natural disasters provide a reliable, resilient ecosystem for data centers

An Adaptable Design

Astute owners and developers evaluate potential projects not only with an eye on current market conditions, but those of the future. Do data centers have staying power, or is there an obsolescence factor that should be considered?

While data center use is growing, so too is cloud-based data storage. Originally, it was expected that cloud-only storage would diminish the need for physical data centers. However, it now seems that hybrid designs that combine cloud services and physical locations are shaping the future. While the cloud will not end the need for data centers, it will alter how they are designed, built, and used.

The business model employed by data companies centers on attracting clients to lease space in their buildings for data storage—and it’s a competitive field. Data centers need to evolve, upgrading their technologies and infrastructural amenities to attract new tenants. A current selling point is sustainability. Consuming huge amounts of energy, data centers are setting targets and implementing strategies to achieve net-carbon-zero performance. This may incur some upfront construction costs, but in the long run will lead to more efficient life cycles, with lower operational costs.

And it’s more than the remote workforce that’s driving the demand for data centers. Data centers are becoming relevant for entire established business sectors, as well. Financial institutions, government agencies, healthcare providers, transportation/logistics firms, and more are increasingly reliant on technology, needing to store and manage vast amounts of data. The return on investment offered by data centers remains equally strong for well-informed owners and forward-looking communities, and collaborating with an experienced team of advisors is the first step in capitalizing on this burgeoning opportunity.

As seen in Mission Critical Magazine, January 2022