Data Center Pricing DebateQ2 2015
By: Sean Tario
I recently read the Cushman & Wakefield Data Center Snapshot Winter 2015 report and shortly thereafter saw a few peers reposting it on Linkedin via an article ongreendatacenternews.org that expanded on the premise that in some markets data center pricing has stabilized and is in fact going up.
I can’t help but comment, as I completely disagree with this assessment. The tangible metrics on our end, and that every data center consultant I know and work with is seeing, show no sign of pricing going up in ANY market right now. “Stabilization” occuring is also extremely relative as, in general, we do not see this happening either. When we do see price “stabilization,” it is only when looking at the initial retail pricing offered by service providers in specific markets, which is never what the end user client ends up paying.
I also completely disagree that supply is waning in key markets. Although TRADITIONAL wholesale options that can accommodate 1 to 2 MW may be limited in key markets, there are a variety of other options available and service providers capable of delivering this type of capacity relatively quickly. They may not have a DuPont or Digital stamp on them, but they are just as viable and more often than not cheaper. The other key point to understand here is that the decision and deployment cycle around large data center deployments is often very long and drawn out. As a result, most clients who are looking to commit to 1 or more MW do not need the entire capacity available within 30 or even 365 days after contracts are signed. Most deployments this size ramp into capacity over long periods of time, starting with more modest power needs. They also generally have 90-180 day buffers between when a contract is signed and when the first cabinet is installed, leaving most sophisticated providers time to add capacity or provide net new build outs for their clients within key markets.
For some more context as to WHY the price per kW across the board in our industry has been dropping consistently, and why I feel it will continue to drop, I recommend checking out Kiamesha Global’s recent post “Data Center Wars – The Falling Price Per kW”. If you disagree, I’m happy to jump on a call and discuss this with you… so don’t hesitate to reach out and talk shop!