The Best Markets for Data Center Real Estate

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As corporations turn to technologies that require immense power for computers and security, the market for data centers has grown. In fact, total leasing volume for this type of property rose about 25% between 2012-2013.

Are you looking to acquire commercial real estate for a new data center? If so, here are the best markets to look at in your site selection process:

New Jersey

New Jersey has established itself as a major data center market serving companies that need proximity to New York. However, it also offers a unique blend of features that make it desirable to IT management teams beyond the tri-state area.

Reliable Power: New Jersey features a robust power infrastructure that can meet the needs of data centers that typically purchase power in megawatts at kilovolt levels. With three different power providers serving Northern New Jersey, it also enjoys a relatively low cost per kilowatt-hour.

Fast Connections: Thanks to its highly dense population, New Jersey benefits from a dense and diverse network of fiber optic connections, allowing data centers to get speedy and redundant connections.

Inexpensive: New Jersey commercial real estate is less expensive to purchase or lease than properties in nearby New York City.

Favorable Weather: New Jersey is seismically inactive and has relatively temperate weather.

Strong Workforce: The market draws from a large pool of talent, refreshed by multiple universities.

For tips on managing occupancy costs in Data Centers, click here.

Sioux Falls, South Dakota

Like much of the Midwest United States, Sioux Falls is establishing itself as a major destination for data centers. While the Midwest might not seem like a hotbed for technology, cities like Sioux Falls offer a unique combination of features that make it a compelling choice:

Extremely Affordable Power: Many Midwestern states offer some of the lowest power prices in the country. According to the Energy Information Administration, industrial power in South Dakota cost 6.97 cents per kilowatt-hour in October 2013. Here is how other states compare:

Iowa: 5.69 cents
Nebraska: 6.6 cents
New Jersey: 10.31 cents
Massachusetts: 12.4 cents
California: 11.86 cents

Cheap Land Costs: If inexpensive land for commercial real estate isn’t attractive enough, it also serves a secondary benefit. Companies can purchase larger parcels of land, giving them physical buffers around their data centers for enhanced security.

Stable Weather: While South Dakota's cold winters are legendary, beneath the snow and ice is a relatively predictable ecosystem. Utility and transportation networks are hardened for the weather and most Midwestern cities don't have major risks like hurricanes, earthquakes or security concerns.

High-Tech Workforce: Sioux Falls or Council Bluffs, Iowa might not be anywhere near Carnegie-Mellon, MIT or Stanford, but Midwestern universities produce highly skilled data center workers. Sioux Falls' Dakota State University holds the NSA's National Center of Academic Excellence Designation, as does the University of North Texas in Denton. Furthermore, the low cost of living make Midwestern cities attractive options.

Very Cold Places

Some companies are turning to foreign data centers located in commercial real estate in places like Sweden and Iceland. While the cold in these markets might make them seem undesirable, it actually makes them an excellent place for a data center:

Low Cooling Costs: Centers in cold places can use outside air for cooling, reducing power consumption. When located far enough north, they can use outside air all year-round, potentially eliminating the need for refrigeration.

Inexpensive, Sustainable Power: Iceland and Sweden both heavily use hydroelectric power for generation. Hydropower is both inexpensive to generate and emission-free.

Global Collectivity: While foreign data centers may have higher latency to the US, they can be better suited for global customers.