CRE Midwest

CBRE Data Center Report ranks Chicago as front runner in market cost comparison

The growing reliance on cloud computing is reshaping traditional network computing and boosting demand for leased data center space in the U.S.

The growing reliance on cloud computing is reshaping traditional network computing and boosting demand for leased data center space in the U.S. For occupiers leasing a data center, Chicago ranks among the markets with the highest total project cost for leasing a data center, according to CBRE Group, Inc.’s latest research report, Leasing a Data Center: U.S. Market Cost Comparison.

The CBRE report, written by Jessica Ostermick, Director of Research and Analysis, CBRE, analyzed a typical 1-megawatt (MW), or 1,000-kilowatt (kW), data center lease over a seven-year term across 23 key markets in the U.S.

Rounding out the markets with the highest total project cost are Boston, Des Moines, Kansas City, Northern Florida, Northern New Jersey, Omaha and Philadelphia. Colocation lease rates per kW are heavily driven by both market competitiveness and maturity. Accordingly, lease rates in a less mature and competitive market like Des Moines are higher than in a more competitive and mature market like Silicon Valley.

In contrast, the most attractive data center markets are Atlanta, Colorado Springs, Dallas, Houston, Northern Virginia, Portland, Salt Lake City and Seattle. Markets identified as moderate in terms of cost segment were Denver, Las Vegas, Minneapolis, Phoenix, Silicon Valley, Southern California and St. Louis.

“As the data center industry expands, IT and real estate executives are grappling with complex site selection decisions, including whether to lease or own a facility. For occupiers seeking to preserve capital or lease a data center, the selection process needs to carefully consider the primary cost variables of rent, power and taxes, and recognize the variability that exists from market to market,” said Pat Lynch, Managing Director, Data Center Solutions, CBRE. “The site selection process for an owned data center will hinge more on the relative costs of power, real and personal property taxes, sales taxes, available incentives, and construction costs.”

Wholesale data center inventory is steadily increasing across primary and secondary markets in the U.S. to keep up with the growing demand. As of Q2 2014, total inventory in primary* markets reached 1,140.9 MW, with another 107.3 MW under construction, according to CBRE’s Data Center Solutions.** Between Q2 2013 and Q2 2014, primary market inventory measured in MW increased 31.3 percent.