According to an article put out today by the industry research group TeleGeography, the vacancy rates for colocation in major markets fell markedly in the past year. Vacancy has fallen from 30% in September of 2010 down to 16% in Washington DC in September of this year for instance. Here’s their full graphic:
Given the steady stream of expansions and new construction that has been announced over the past couple of years by virtually everyone in the data center industry, it seems a bit counter-intuitive that they’ve actually been losing ground steadily. But perhaps this is a delayed symptom of the 2008-2009 credit freeze, where at the time it was postulated that demand might soon outstrip supply and cause a pricing spike. While colocation pricing has been healthy, that fear didn’t materialize.
But large colocation facilities take time not just to plan and construct, but also to sell large chunks of space to companies many of whom then break it up further etc. The slowdown caused by the credit freeze paused that process for about a year in most cases. Even though spending returned in force soon thereafter, perhaps we are now seeing its echo. Demand has clearly not taken a similar breather, but more capacity comes online every month it seems so things will surely even out before long.
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Thanks for the review, Rob. Just to clarify one important point. The reason this trend may appear counter-intuitive is that we are specifically referring to retail colocation space here — not wholesale. The two markets don’t always mirror each other’s capacity trends. There may very well be a capacity glut in some metro areas for wholesale data center space. Our data refer to fitted space at multi-client sites. In many hub colocation markets, the major retail operators can’t fit out usable space fast enough. They continue to fill existing capacity at a surprisingly fast rate.