Twitter Chat Transcript: Data Centers

In a Twitter chat with CPE on February 15, 2018, Todd Smith, chief technology officer of data center solutions at Transwestern, discussed investment opportunities in this important CRE niche. 

The following is a transcript of the event. 

Hello, and welcome to what should be a very interesting chat about data centers. Today we’re talking to Todd Smith, chief technology officer, data center solutions @transwestern. #cpechat

— CPExecutive (@CPExecutive) February 15, 2018

 

We have some questions, but for those who want to participate, feel free to send Todd your questions as well using #CPEChat. Thanks for joining us, Todd!

— CPExecutive (@CPExecutive) February 15, 2018

Glad to be here @CPExecutive! So those tuning in can follow along easier, I’ll include the question number and my response number. I’ll add a period to indicate the last response tweet #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Data center investment has exploded recently. What has caused the uptick? #CPEChat #datacenters #CRE

— CPExecutive (@CPExecutive) February 15, 2018

Q1/1 Demand for data in the modern #economy is practically insatiable from both a commercial and consumer perspective. The volume of data is growing at an exponential rate while the cost to process, store & transport drops significantly each year #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q1/2. Cheaper data transport, dropping on avg 35%/yr, has essentially unchained large users from having to be where the data is. Off-site properties have been created to allow orgs and individuals to store data in large volumes in dedicated facilities #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q2. Does this increase in demand translate to ample opportunity to invest in or develop data centers? #CPEChat #datacenters #CRE

— CPExecutive (@CPExecutive) February 15, 2018

Q2/1 Absolutely but it is definitely not a simple business to jump into. While there are significant opportunities, developers & investors interested in entering this sector should do their homework before moving forward #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q2/2 There are many factors to consider before jumping in, including how the asset will be positioned vs existing competitive alternatives, how it will operate & who will run the facility #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q2/3. Potential tenants will ask these questions and more, and overzealous developers that haven’t thought through these issues will have a hard time finding tenants #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q3. What are some key considerations for developers/investors to look for in a potential new venture? #CPEChat #datacenters #CRE

— CPExecutive (@CPExecutive) February 15, 2018

Q3/1 What a property is starting with from a utility standpoint is critical to understand. Utilities such as power and water need to have high reliability and capacity. Connectivity is of utmost importance #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q3/2. The more fiber connectivity from as many providers as possible the better. Cost of connectivity is often out of the hands of the operator but understanding how this affects the potential tenants vs alternatives is impt due diligence #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q4. What about investors looking to acquire existing data centers? #CPEChat #datacenters #CRE

— CPExecutive (@CPExecutive) February 15, 2018

If you have any questions for Todd Smith, Chief Technology Officer in Transwestern’s Data Center Solutions group, to answer live feel free to jump in with #CPEChat! @DataCenterEvolu @datacentreall @datacenter @DataCtrJournal

— Transwestern (@Transwestern) February 15, 2018

Q4/1 This may seem like a safer option on the surface, but there can be just as many pitfalls with this route #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q4/2 As higher-quality services and products are available at consistently lower prices within maturing data center markets, buyers need to understand the center’s long-term profitability #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q4/3. It’s best to enlist the help of experts in data center operations and finances before making a commitment #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q5. Which markets are the best to invest in? #CPEChat #datacenters #CRE

— CPExecutive (@CPExecutive) February 15, 2018

Q5/1 This depends on how much capital is available for the investment. The major markets in the US are N. Virginia, Silicon Valley, Chicago, Dallas, NYC/New Jersey, Atlanta and several others #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q5/2 All those markets have strong firms that specialize in large-scale, high-performance data center facilities such as @digitalrealty, @Equinix, @Cyrusone, @CoreSite & @DataCenters_QTS, meaning it’s difficult to jump in & compete #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q5/3 Once you get below the top 20 US markets or top 50 on a global basis there are tremendous opportunities in sizeable population centers that have had very little data center development #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q5/4. These markets are too small for the larger players to invest in at this point but may be good investment options for them via acquisition in the long term #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q6. But what about other investors interested in buying/developing these properties? How much opportunity is there for them, and what are the cap rates for data center purchases? #CPEChat #datacenters #CRE

— CPExecutive (@CPExecutive) February 15, 2018

Q6/1. The smaller markets are a great opportunity for those interested in buying or developing since there isn’t as much competition. Major players are acquiring in the 6 to 8% cap rate range #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

 

Q7. Why are data center facilities important if everything is going to “The Cloud”? #CPEChat #datacenters #CRE

— CPExecutive (@CPExecutive) February 15, 2018

Q7/1 It’s important to understand that the data that resides with cloud service providers all lives within data center facilities #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q7/2 The largest cloud providers such as @Google, @Amazon, @Microsoft, @IBM and @AlibabaGroup all have a leasing strategy in working with data center operators for at least some of their global properties #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q7/3. When it comes to large organizations there will be a hybrid approach for the foreseeable future to owning private facilities, leased facilities & cloud services to house critical applications #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q8. Why does the geographic location of a data center matter? #CPEChat #datacenters #CRE

— CPExecutive (@CPExecutive) February 15, 2018

Q8/1 Geography matters for a variety of operational & financial reasons. Many data-intensive apps are sensitive to latency, or time it takes for data to get to users, requiring the data origination point to be w/in a certain distance from the user #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Q8/2. For disaster avoidance reasons, organizations build geographic redundancy btwn the locations where critical data applications reside. Cost can also vary greatly from a construction and utility cost standpoint #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018

Does anyone else have any questions for Todd Smitth @Transwestern? Feel free to jump in! #cpechat

— CPExecutive (@CPExecutive) February 15, 2018

Great! Well those were all our questions. Thanks to everyone who joined us today, and especially thanks to Todd Smith @Transwestern. #CPEChat

— CPExecutive (@CPExecutive) February 15, 2018

Thanks for having me @CPExecutive! For anyone who has questions or needs data center consulting services, feel free to reach out at [email protected]. See you next time! #CPEChat #datacenters #CRE

— Transwestern (@Transwestern) February 15, 2018