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London, September 18 2008 – The data centre real estate market remains buoyant despite the doom and gloom surrounding current commercial property woes. This is the conclusion of an article in this month’s edition of BroadGroup’s Data Centre News, by Mark Larard, director of the data centre advisory group at property specialists, Jones Lang Lasalle.
Commenting on the significant growth experienced in the sector in 2007, with the culmination on Sarbanes Oxley, new blade server technology breakthroughs and that new modern stock needed to be brought into the market, the banking sector took the lead in third party outsourcing:
“For those banks which were not well down the path in procuring their Data Centres by Q3 2007, securing internal sign off to spend these sorts of sums on money was inevitably going to become problematic. That doesn't mean that the requirement for a Data Centre has gone away for the Banks, and other Corporates, it just means that it will have to be approached in another way,” comments Larard.
Indeed, despite the current crisis confronting financial institutions, the need to outsource IT to third party operators may well be accelerated: “....an operational lease is always going to look more favourable on a Corporate Balance sheet under International Accounting Standards than the potential financial black hole of a Data Centre.”
Looking ahead, although concerns have been raised about the reported 1.9 million sq ft (raised floor) of stock that is in the pipeline, which could even be significantly higher, the real question is how much of this is speculative. Because of the attendant levers in place and resulting time factors to bring data centres on line, such as the appropriate power contracts, infrastructure upgrades and lead times for technical equipment, space availability is more paced.
Jones Lang LaSalle research suggests that there is approximately 300,000 sq ft of Data Centre (raised Floor) space ready either now or over the next 12 months, and that there are genuine requirements, in the market, ready to act, of 300,000 sq ft.
“Combined with the fact that close to 450,000 sq ft has already been let this year, these indicators suggest that the Data centre sector is probably going to have its second best year in turnover ever.”
Although the very big deals from banks may not be around for some time to come, there are nevertheless technical operators with established covenants, actively looking for freehold sites. The demand to co-locate at these sites by occupiers remains as strong as ever, and if anything the shortage of new supply actually reaching the market at this time is leading to price escalations of 10% plus at some facilities.
Added to these factors, BroadGroup’s own research concurs with the view that data centre demand is also originating from some exceptional sources, but notes that competition is becoming increasingly international.
“We are aware of assessment processes in place which are evaluating opportunities across several countries at a time,” commented Steve Wallage, managing director of BroadGroup Consulting.
“Data Centre values have also never been historically higher, and with the emphasis on cost control across the broader enterprise segment, in addition to location, availability and service offerings, the market remains very active.”
The full article is available from www.datacentres.com

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