Originally posted to HFF by HFF Senior Director Kerry Hawkins and Associate Michael Restivo in HFF’s Boston office.
In the world of commercial real estate, only a handful of product types can truly be classified as mission critical – healthcare facilities and data centers are two that immediately come to mind. It’s not surprising that, because of their importance to our daily living, the sheer cost associated with developing either one of these product types is dramatically more expensive than an office or industrial building. Data centers have their own cost nuances: They need to be located within close proximity to major fiber optic trunk lines with dual feeds from the power grid and require heavy power and security infrastructure.
Location
The adage holds true for data centers: Location! Location! Location! To decrease latency, data centers need to be located as close to the fiber optic trunk lines as possible. Perhaps, more important, these facilities are best suited with dual, independent feeds from the power grid. By virtue of these two qualities, data centers often are set within a sizable corporate concentration, putting a premium on land pricing.
What to expect: The Tier I markets will continue to see more construction and absorption but “edge cities” will also begin to thrive as providers seek to spread their megawatt (MW) footprint geographically.
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