{"id":1004732029,"date":"2024-10-10T08:40:47","date_gmt":"2024-10-10T16:40:47","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004732029"},"modified":"2025-02-26T02:21:28","modified_gmt":"2025-02-26T10:21:28","slug":"getting-in-the-heads-of-data-center-tenants","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/getting-in-the-heads-of-data-center-tenants\/","title":{"rendered":"Getting in the Heads of Data Center Tenants"},"content":{"rendered":"\n

The national data center market faces many constraints, including supply, access to power and high construction costs. And yet, inventory continues to grow as vacancy rates decrease.<\/p>\n\n\n\n

According to a CBRE global data center trends report, in the first quarter of 2024 the national data center inventory grew 24.4 percent on a year-over-year basis. During the same period, vacancy rates hit new lows across the major data center markets\u2014Northern Virginia, Dallas-Fort Worth, Chicago and Silicon Valley.<\/p>\n\n\n\n

With stiff competition and an extremely tight market, brokers have to be at the top of their game to get data center tenants what they want. But what exactly does this entail?<\/p>\n\n\n\n

What\u2019s changed<\/h2>\n\n\n\n

While many of the things data center tenants want have remained the same, others have significantly changed in recent years. Among those that have changed, power requirements is perhaps the biggest.<\/p>\n\n\n

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Bo Bond. Image courtesy of Cushman & Wakefield<\/em><\/figcaption><\/figure><\/div>\n\n\n

\u201cIf one of my clients was looking at space today versus 10 years ago, the requirement for power is considerably greater,\u201d Bo Bond, executive managing director in\u00a0Cushman\u00a0&\u00a0Wakefield’s\u00a0Global Data Center Advisory Group, told Commercial Property Executive<\/em>.<\/p>\n\n\n\n

Another thing that has shifted is preferences, or risk tolerance, surrounding forms of power. Tenants today might accept a less distributed form of power, since platforms allow for more ways to backup systems and more redundancy tolerance. Previously, redundancy of mechanical and electrical systems was less distributed in nature, Bond mentioned.<\/p>\n\n\n\n

Howard Berry, principal in charge of national data center solutions at Avison Young, similarly noted redundancy as a top concern as some applications require strict uptime guarantees.<\/p>\n\n\n\n

\u201cTenants expect their data center providers to prioritize reliability and invest in robust infrastructure, often opting for N+1 configurations to ensure seamless operations,\u201d he said.<\/p>\n\n\n\n

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READ ALSO: <\/strong>More Data Centers, Please!<\/a><\/p>\n\n\n\n

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Another recent shift, according to Berry, is tenants expecting that data center landlords or operators will negotiate tax incentives on their behalf.<\/p>\n\n\n\n

\u201cHistorically, providers have not been directly involved in this process, but now users are seeking their assistance to secure these incentives upfront,\u201d Berry noted, pointing out that tenants are seeking more comprehensive solutions from providers.<\/p>\n\n\n\n

In addition to preserving their bottom line, more data center tenants are focusing on improved energy efficiency and furthering their ESG initiatives.<\/p>\n\n\n\n

\u201cTenants are now prioritizing data centers that leverage renewable energy sources such as solar and wind to reduce their carbon footprint,\u201d said Joseph Jemal, director of capital markets at KSR.<\/em><\/p>\n\n\n\n

Recurring priorities<\/h2>\n\n\n\n

Location is still a top priority for data center companies. \u201cTenants prioritize proximity to transportation hubs, business centers and access to reliable power and fiber infrastructure,\u201d Jemal said, adding that room for future expansion is also a key consideration.  <\/p>\n\n\n\n

And of course, access to the cloud is more important than ever, Bond pointed out. With cloud companies\u2014the Amazons and Googles and Microsofts of the world\u2014continuing to grow, cloud access is more prolific than ever.<\/p>\n\n\n

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Howard Berry. Image courtesy of Avison Young<\/em><\/figcaption><\/figure><\/div>\n\n\n

Then there are the physical space requirements, which also remain crucial. According to Berry, when it comes to selecting prime space, data center tenants mainly prioritize power per rack and cooling infrastructure.<\/p>\n\n\n\n

\u201cThese critical components ensure the reliability and efficiency of their operations,\u201d Berry said. \u201cFurthermore, tenants seek data centers with flexible design capabilities, allowing them to adapt to their specific needs and workloads.\u201d<\/p>\n\n\n\n