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Why Are Some Data Center Locations More Desirable Than Others?

June 22, 2017

With IT services and applications playing an ever-increasing role in the day-to-day operations of every enterprise, data centers are rapidly growing in both number and complexity. If you live in a place like Northern Virginia, Northern California or Chicago, you may be seeing more and more of these large data centers appearing in the landscape.

But why are those cities such hotbeds for data center location and construction? What makes them so desirable? And, how are the actual locations within these cities selected?

To learn what makes one city a more desirable data center destination than another, and to help understand why a building or piece of land would be an ideal data center or footprint, we sat down with Michael Ortiz, vice president of site selection and acquisitions, at Digital Realty.

What factors does Digital Realty take into consideration when identifying new cities or regions in which to build or buy a data center?

Michael Ortiz: When doing site selection, the "must haves" are the basics. They're things like reliable, diversified power, accessibility of water and diverse connectivity.

But there is also another layer of considerations which others should think about. These sites and regions need to be places that are mostly free from natural disasters, easy to secure entitlements from local municipalities, and have the ability to take advantage of state incentives. We consider the cost of the land and assess where its best to deploy capital. We place emphasis on the connectivity afforded to new potential customers. We look at the cost, reliability and diversification of the power that comes to our site.

And - of course - at the end of the day, location, location, location, is key.

How much does customer feedback and demand weigh into Digital Realty’s decision regarding data center location? If an existing customer or prospect is looking for data center space in a specific region or city, will that impact the company's plans to build a data center there?

Michael Ortiz: We work with some of the most sophisticated and most respected tech, hyperscale and enterprises in the world. And when these companies come to us, they already have a mindset of why they want to be in that market. Digital Realty has been successful as a provider by being integrally woven into the fabric of their planning process early on. We're very proactive, not reactive. The end result is customer feedback that can be used in both the site selection and the design process. From there, we take a deep dive into the site selection process, which entails a number of other different factors.

When a new city or region is identified, what process does the company follow for identifying a physical location for the data center?

Michael Ortiz: There are a number of factors that we consider. For example, we look for land that is relatively flat and free of material wetlands. And we try to find land that already has fiber within close proximity. The same thing can apply to power. Other things include ready access to sewer and water.

What facilitates the decision to go with a brownfield redevelopment over a greenfield project (or vice versa)? Is one preferable over the other? Does the company explore one prior to exploring the other?

Michael Ortiz: Regarding the brownfield vs. greenfield decision, it ultimately comes down to the specific market and the conditions within that market.

An example is Toronto, where we're currently redeveloping the Toronto Star building. We made the decision to repurpose the existing building because of the great location. There is not an existing site like this one that would enable us to build a greenfield data center.

Once the market conditions are considered, it comes down to speed to market. We’ll look at the sites available to us and make a decision to go with the one that ensures that we can be operating as effectively and rapidly as possible.

Learn more about Digital Realty’s wholesale data centers located in Tier 1 markets across North America.