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Data Center Market Gains Traction in First Half of 2015

JUNE 2015 | DATA CENTER

DATA CENTER MARKET REPORT

Data center demand is increasing, and data center providers are emerging with premium, enterprise-quality capacity. Locally, a number of colocation providers have signed deals for new tenants on their recently-built inventory. Stream and Databank have signed new tenants, and Irongate has signed three new customers in the first half of the year. ViaWest has seen an increase in leasing activity with both SMB and Enterprise customers. These third-party providers have built new facilities or retrofitted existing buildings in suburban locations to capture interest in the previously underserved market.

In downtown Minneapolis, the former American Express data center, located at 1001 3rd Avenue South, sold in January for $22.4 million. The new owner, DCI Technology Holdings, is planning on investing an additional $20 million to convert it into a multi-tenant data center and put upwards of 120,000 square feet of leasable white floor out to market. 1001 3rd is located in close proximity to the area’s major interconnection hub, Cologix run Minnesota Gateway, located in the 511 building.

Other local providers are in talks with active users in the market, and some are planning expansion of their facilities’ footprint and UPS capacity. The Databank building in Eagan, Centurlylink/Compass in Shakopee, OneNeck in Eden Prairie, Stream in Chaska, twTelecom in Minnetonka, and Cologix in Minneapolis all have plans or projects completed for additional white floor inventory.

And yet other players are still coming. Operating enterprise data centers and buildings with significant leave behind infrastructure are serving as attractive acqusition targets for incoming colocation and cloud service providers. The increase in data center RFPs seen in recent months, and larger trends such as distributed content demand, are proving that smaller data center footprints in secondary markets such as MSP can make strategic sense for national providers.

MARKET REPORT | JUNE 2015 | DATA CENTER | MINNEAPOLIS-ST. PAUL

COLLIERS INTERNATIONAL | MINNEAPOLIS-ST. PAUL

DIVERSE OPTIONS FOR DIVERSE NEEDSThe current data center market contains three main options for businesses: on-premesis (owned) data centers, collocation (outsourced) data centers, and the cloud, (on-demand storage, compute, network). Many companies are choosing a hybrid of these three options based on their specific IT needs and actively negotiating with third-party providers to have the option to move in and out of each category as their needs evolve.

Companies in our market and elsewhere are embracing the outsourced options. They are finding they can be nimble while still addressing their security concerns and data compliance needs with experienced operators. To these companies, it makes financial sense to put all or most of their IT assets into a leased private, shared or cloud data center environment. Still, there remains a segment of larger enterprises that want or need to own and continue to pursue build-to-suit options.

Beyond cost of power, cost of labor, utilization of tax incentives and applicability of offering, factors effecting the service provider’s competitive edge is customer timing and location constraints. When users have more stringent site selection parameters, they are forced to be more flexible with possible solutions and vendors. To address this and the request for more options within one provider, some collocation providers are acquiring or partnering with cloud providers (i.e. Equinix/Nimbo, QTS/Carpathia) to ensure their facilities can offer customers the most options across their entire portfolio.

The bigger picture shows no slowing to the expediential growth of data through emerging global markets and from trends such as Internet of Things (IoT). According to the market research firm IDC, the digital universe is doubling every two years, and is expected to multiply 10-fold between 2013 and 2020. Businesses will continue to seek fast, effective, economic and agile solutions from their data center offerings. Companies enlisting advisors with merged expertise to consult and negotiate on their behalf will be well positioned to keep current with the evolving IT/Facilities landscape.

Cloud infrastructure spending will increase 21% over 2014, accounting for 33% of all IT infrastructure spending in 2015.

2013: 1.6 ZB 2014: 6.5 ZB

Mobile data �ow will rise 11-fold between 2013 & 2018Source: Worldwide Quarterly Cloud IT Infrastructure Tracker

Source: Cisco Systems, Inc.

Source: IDC

Source: Gartner

The Cloud market is growing six times faster than the overall IT market.

At a recent Data Center World Conference, Microsoft’s Paul Slater, presenting on future data centers, predicted robots will likely replace some of the humans working in data centers within the next decade.

THE FUTURE OF DATA CENTERS

MARKET REPORT | JUNE 2015 | DATA CENTER | MINNEAPOLIS-ST. PAUL

COLLIERS INTERNATIONAL | MINNEAPOLIS-ST. PAUL

Colliers Minneapolis-St. Paul Technology Services maintains a proprietary database of available data center space. For additional information and to access this data please contact:

Dan PetersonSenior Associate | Technology SolutionsDIRECT 952 897 7713dan.peterson@colliers.com

DATA CENTER SUPPLY / DEAL ACTIVITY

CARRIER CITY NOTES

Cologix Minneapolis Added 10,000 SF of white floor space at the 511 Building

Centurylink Shakopee Has completed their 2nd phase of the Tier III Certified facility

tw Telecom Minnetonka Added additional white floor at the Feltl Rd. facility in late 2014

DataBank Eagan Recently signed a new tenant and opened 10,000 square feet of white floor in the 90,000 SF facility

Iron Gate East Metro Signed deals for 300kW, 225kW and 225kW with three new customers

ViaWest Chaska Opened 45,000 SF of white floor in 2014

Stream Data Chaska Signed a new tenant for 1.2mW and is planning to build-out their second and third 10,000 SF suites

OneNeck Eden PrairieSigned a new 500 sqft colo customer & a 5-year contract for cloud/colo services for the City of Minneapolis

DCI Technology Minneapolis Acquired the former AMEX data center and will spend $20 million to convert to a multi-tenant facility

MARKET REPORT | Q4 2011 | OFFICE | MINNEAPOLIS-ST. PAUL

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