Shortage in Colocation Looms Nearer

May 29th, 2009 by · 1 Comment

Data Center Knowledge had an excellent article yesterday about the looming shortage in colocation space, I recommend a read.   The frozen credit markets forced many projects to be canceled or delayed over the winter, and only a few have restarted.  The trouble areas seem to be Santa Clara and Northern Virginia, which have vast existing colo footprints but even greater demand.  Given the long lead time for new facilities, a shortage seems inevitable at this point.

As I have discussed before, a scramble in space will certainly affect pricing.  But what it also might do is force some geographical shifts.  There is so much of the exsting colo square footage that is in just a half dozen super clusters, but the current environment could result in a spillover effect.  As prices rise in Ashburn and Silicon Valley, the attractiveness of Chicago, Dallas, and Denver will rise.  Some areas, like Raleigh and Phoenix which have colocation facilities but nowhere near as many, might take advantage of this situation to attract new builds to their regions with some creative financing. 

The question is, how soon will rising pricing attract the capital to start building again?  Will this be a brief imbalance in supply and demand that quickly self corrects, or a prolonged one that tears up the current system?

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Categories: Datacenter · Financials

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  • Bill says:

    Look for Sacramento to be an alternative for the bay area. Same power costs as Santa Clara, less for power than other areas, good fiber, less active seismically.

    Look for Raleigh to be an alternative to NoVa. Same reasons as above (except for seismic).

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