For many organizations, 2020 was the year digital transformation shifted into high gear. What was a 5-10-year plan for some less-technical companies became an almost instantaneous business imperative, as they were forced to adapt quickly to remote or hybrid work protocols and virtual operations.
This fast-paced digitization has driven exponential growth for the data center market, which is expected to continue for the foreseeable future.
In addition to increasing the number of data center facilities needed to keep up with the data explosion, the growth of the industry is also changing the idea of what makes a beneficial region to build out a facility in.
In 2020, Cushman & Wakefield conducted a study evaluating 1,162 data centers across 38 global markets, with each data center scored across 12 weighted criteria:
Using this data to identify key differentiators for primary, secondary and tertiary data center markets, the study shows that multiple secondary or tertiary markets are now highly sought-after, compared to the past.
Primary data center markets, such as Northern Virginia, Seattle, Dallas, Chicago and Los Angeles, are still in high demand. But the cost and availability of real estate in these regions, coupled with changing market drivers, are opening up new opportunities in smaller markets.
As mentioned above, accelerated digital transformation in companies of all sizes is a huge factor in the growth of the data center industry. But data gravity is also having a major impact on corporate decisions to expand into new regions, such as the Google Cloud facility in Salt Lake City.
In 2017, Salt Lake City was considered an up-and-coming player in the tertiary market, and today, the city counts PayPal, eBay and Facebook as just a few of its big logo data center residents, joining Google Cloud.
Salt Lake City has been dubbed the “Silicon Slopes” due to the influx of large enterprises and hyperscale facilities in the region. But what exactly is drawing some of the biggest names in technology and e-commerce to this mid-sized city in the mountains?
The state of Utah, and Salt Lake City in particular, have many attributes making the region an ideal location for data center expansion:
Salt Lake City provides data center tenants access to extensive fiber infrastructure, interconnectivity and high bandwidth from some of the top providers, which are integral to minimizing latency and maximizing both speed and performance overall.
Businesses in Utah benefit from exceptionally low electricity and natural gas costs. And with more renewable energy providers moving into the region, data centers in Salt Lake City have access to solar and wind power supplies, which provide additional cost savings and incentives.
Utah’s cool, dry climate and low propensity for natural disasters also contribute to the region’s appeal. The low humidity and cold temperatures allow data centers to use ambient cooling techniques to reduce costs. With one of the nation’s lowest rates of catastrophic events, construction in the region is considered low-risk from a disaster standpoint.
Utah is known as a pro-business state, offering several tax and financial incentives to companies operating in the region. For example, during its 2020 session, the Utah State Legislature passed Senate Bill 114, which positively modified the sales and use tax exemptions for qualified data centers. The state also boasts a corporate income tax of only 5%, which makes Utah a very attractive place to build or expand a data center facility.
In addition to the monetary incentives for building a data center in Salt Lake City, the availability of affordable real estate and a highly educated workforce are enticing more and more businesses to build and expand their data center capacity in the region.
Post-COVID-19 supply chain issues continue to plague data center construction initiatives. For those businesses that want to take advantage of the current value and affordability available in growing markets such as Salt Lake City, modular data center construction can help. Modular alleviates some of the challenges of traditional data center construction while also providing benefits unique to the premanufactured approach.
Modular data center construction techniques speed up time to deployment, reduce supply chain disruptions and prevent many quality issues. This is done in part by including quality checks and testing throughout the manufacturing process.
One of the main benefits of opting for modular construction is that these facilities are highly scalable, so you aren’t locked into limited capacity or hit with the expense of overprovisioning. And, the small footprint of these data centers makes them cost-effective to transport, even to remote or hard-to-access areas.
It’s very apparent that the data center industry is undergoing some significant changes in the wake of the global pandemic and in anticipation of major new technology rollouts, such as 5G. If the rapid elevation of Salt Lake City from a tertiary market to a borderline primary market is any indication, we have a lot to watch over the next few years.
Download Key Takeaways from CBRE's 2021 Data Center Predictions and the Impact on Colocation to learn what you can expect in the near future for data center construction, and how to meet growing capacity needs in new and evolving markets.