The Hot New Trend in Commercial Real Estate? Renting to Data Centers (yahoo.com) 30
U.S. real estate developers "are having a hard time keeping up with demand," reports the Los Angeles Times, "as businesses in search of secure spots for their servers rent nearly every square foot that becomes available..."
Construction of new data centers is at "extraordinary levels" driven by "insatiable demand," a recent report on the industry by real estate brokerage JLL found. "Never in my career of 25 years in real estate have I seen demand like this on a global scale," said JLL real estate broker Darren Eades, who specializes in data centers...
The biggest drivers are AI and cloud service providers that include some of the biggest names in tech, such as Amazon, Microsoft, Google and Oracle. With occupancy in conventional office buildings still down sharply following the impact of the COVID-19 pandemic and property values falling, data centers represent a rare ripe opportunity for real estate developers, who are pursuing opportunities in major markets like Los Angeles and less urban locales that are served by plentiful and preferably cheap power needed to run data centers. "If you can find a cluster of power to build a site, they'll come," Eades said of developers. Construction is taking place at an "extraordinary" pace nationwide and still not keeping up, the JLL data center report said. [Data center] "Vacancy declined to a record low of 3% at midyear due to insatiable demand and despite rampant construction."
Development increased more than sevenfold in two years, with the pipeline of new projects leveling off in the first half of 2024, a potential signal that the U.S. power grid cannot support development at a faster pace. But when projects currently under construction or planned are complete, the U.S. colocation market, in which businesses rent space in a data center owned by another company for their servers and other computing hardware, will triple in size from current levels... Real estate investors and landlords are being drawn into the market because demand from tenants is high and they are likely to renew their leases after shouldering the costs of setting up data centers. "They invest in their space and in your space and they tend to stick around longer," said Mark Messana, president of Downtown Properties, which owns offices in Los Angeles and San Francisco. "As we all know, the office market is struggling a little bit, so it's nice to be able to have some data customers in the mix..."
Power demand for computing is growing so intense that it threatens to strain the nation's electrical grid, sending users to remote locations where power is plentiful and preferably cheap. Data center developers are working in Alabama, the Dakotas and Indiana, "traditionally states that wouldn't have data centers," Eades said.
The article includes "the mother of all data centers" in the western U.S. — a 30-story building where "thousands of miles of undersea fiber-optic cables disappear into an ordinary-looking office tower." Once a prestigious location for businesses, "The recent departure of a law firm that had been in the building more than 50 years cleared out five floors that will quickly be re-leased to data tenants, said Eades, who represents the landlord..."
To retrofit the building for data centers, "two elevators were removed so the empty shafts could hold water pipes used to help keep the temperature cool enough for the heat-producing servers" — and developers are happy rents "can be double what they are at newer downtown office high-rises, according to real estate data provider CoStar...
"By 2030, data centers could account for as much as 11% of U.S. power demand — up from 3% now, according to analysts at Goldman Sachs."
The biggest drivers are AI and cloud service providers that include some of the biggest names in tech, such as Amazon, Microsoft, Google and Oracle. With occupancy in conventional office buildings still down sharply following the impact of the COVID-19 pandemic and property values falling, data centers represent a rare ripe opportunity for real estate developers, who are pursuing opportunities in major markets like Los Angeles and less urban locales that are served by plentiful and preferably cheap power needed to run data centers. "If you can find a cluster of power to build a site, they'll come," Eades said of developers. Construction is taking place at an "extraordinary" pace nationwide and still not keeping up, the JLL data center report said. [Data center] "Vacancy declined to a record low of 3% at midyear due to insatiable demand and despite rampant construction."
Development increased more than sevenfold in two years, with the pipeline of new projects leveling off in the first half of 2024, a potential signal that the U.S. power grid cannot support development at a faster pace. But when projects currently under construction or planned are complete, the U.S. colocation market, in which businesses rent space in a data center owned by another company for their servers and other computing hardware, will triple in size from current levels... Real estate investors and landlords are being drawn into the market because demand from tenants is high and they are likely to renew their leases after shouldering the costs of setting up data centers. "They invest in their space and in your space and they tend to stick around longer," said Mark Messana, president of Downtown Properties, which owns offices in Los Angeles and San Francisco. "As we all know, the office market is struggling a little bit, so it's nice to be able to have some data customers in the mix..."
Power demand for computing is growing so intense that it threatens to strain the nation's electrical grid, sending users to remote locations where power is plentiful and preferably cheap. Data center developers are working in Alabama, the Dakotas and Indiana, "traditionally states that wouldn't have data centers," Eades said.
The article includes "the mother of all data centers" in the western U.S. — a 30-story building where "thousands of miles of undersea fiber-optic cables disappear into an ordinary-looking office tower." Once a prestigious location for businesses, "The recent departure of a law firm that had been in the building more than 50 years cleared out five floors that will quickly be re-leased to data tenants, said Eades, who represents the landlord..."
To retrofit the building for data centers, "two elevators were removed so the empty shafts could hold water pipes used to help keep the temperature cool enough for the heat-producing servers" — and developers are happy rents "can be double what they are at newer downtown office high-rises, according to real estate data provider CoStar...
"By 2030, data centers could account for as much as 11% of U.S. power demand — up from 3% now, according to analysts at Goldman Sachs."
Colocation (Score:2)
Re: Colocation (Score:1)
Re: Colocation (Score:2)
Old news (Score:3)
During the 2008 financial panic, NPR (?) covered a story on how a Manhattan office building, too old to meet apartment or office building codes, was turned into a self-storage unit facility. The rent per square foot was 75 or 80% of an apartment rental but required 20% of the costs since there was no running water, no water drains, no toilet, no shower, no AC. Net, net it was more profitable than an apartment or office building.
Converting Old Office Buildings Into Outstanding Self-Storage Facilities
http [insideselfstorage.com]
No rent controls (Score:2)
Forgot to add that, since it was not an apartment building, there were no rent controls and no onerous laws to follow to evict a non paying tenant.
Re:Colocation (Score:5, Interesting)
It is AI. Crypto miners, at least in the Uk, rent regular industrial units and bypass the meter to steal electricity. It is not commercially viable to mine crypto if you are paying for the electricity. AI is companies like Google, Microsoft, and Amazon, who do pay for their electricity.
Re: (Score:2)
So the power usage is going from being spread around to company located server rooms to these centralized server rooms.
Re:Colocation (Score:4, Interesting)
What's weird about this is that a bunch of corporate data centers just shut down because they moved most of their servers to cloud hosting like AWS and Azure.
Are they really going to build new data centers for AI, or are they just going to refurbish and reopen the ones that already exist?
Re: (Score:3)
Re: (Score:2)
If Corps owned that data center that they closed out then they might sell it to gain back some capital $$ to invest in something that direct impacts/influences their core business(es). And some will just pocket the savings.
If it was rented / leased space, then the building owner gets to decide what to do with it while the Corp funnels the $ spent on renting space into renting cloud space.
The smart data center owners that want to stay in the rental game should consider capital improvements that have big bang
Re: (Score:1)
What's weird about this is that a bunch of corporate data centers just shut down because they moved most of their servers to cloud hosting like AWS and Azure.
Yeah... But the servers still have to physically exist... Moving to the cloud means you don't own the server anymore... But someone still has to have the server for you to use..
Re: (Score:2)
I wonder if they can develop for dual use, I mean what does a data center really need in terms of sunlight and surface? I picture a nice small home suburb, where no one needs to think about the fact that underneath the houses about 20 feet down, is a sprawling data center.
Re: (Score:3)
It has been done before.
The example linked below is not 20 foot down, but looks like it's all at ground level, or a step up or down.
The problem is having enough rentable floor space and still have space on the property for chillers, A/C, security, power & data vault(s), and so on. After all, it is a residential neighborhood so it has to fit in with "the look" and various codes & regulations for that setting. Think: lot-line setbacks, allowable noise generation, allowed lighting, location & heigh
Re: (Score:2)
As I am not an architect or civil engineer, I don't follow their journals, and I have no idea what they discuss or if any of the following is being researched or conceptualized. But, your comment suggests a crucial pathway for future urban planning and integration. If you could build a new city or urban encampment from scratch, maybe it should have the following.
Massive data center underground, deep enough to not visibly interfere with the usual urban or suburban environment above.
Above that, but still un
Talk with Sears and Roebuck again? (Score:2)
Seer how banking on that plan worked out for Sears and KMart.
One Wilshire (Score:5, Informative)
Telco, not "AI data centers" (Score:2)
The article talks about One Wilshire like it's something new. That building has been one of the largest telecom hubs on the planet since the late 1990's. Honestly I'm surprised there were any normal tenants left in it at all.
Yeah, that is 30 stories of telco exchange. Every major global city has one building like that, very specialized. These are nothing like the same size as one of the many, actual, world-leading compute or storage datacenters out there.
If not telco then most of these urban tower refit customers in my experience are small, cost-concious businesses like Bank Of America - not cutting edge demand or scale.
2Br 1 Bath - Data Center Ready (Score:2)
We are offering a 2 Bedroom, 1 bathroom apartment that is data center ready.
This wonderful apartment sits in a beautiful neighborhood with great schools. There are 3 grocery stores within walking distance. All counters are marble. Appliances not included.
The plugs are up to spec at every 6 feet on a wall. Use as many power strips as you like. First come, first served.
--
Well, real estate is always good, as far as I'm concerned. - Donald Trump
What about all that vacant office real estate? (Score:3)
I thought there was some sort of crisis in commercial estate with buildings going unused due to work from home, and companies trying to get rid of the expensive leases they have for those offices. While the idea has been floated to convert those offices into residential units the lack of plumbing and climate control infrastructure for so many independent living spaces has been a hurdle. L
Wouldn't this be a fine use for all that space? Servers don't need to shower, will all live together without arguing over the thermostat, and there's high speed networking already present.
Re: (Score:2)
The only thing you got wrong are the showers & plumbing. One Wilshire building in TFA removed two of the elevators & repurposed the shafts to hold the increased plumbing needs of 30 floors of server rack cooling. Se
Re: (Score:2)
HPC needs a ton of water and AC. Whatever networking gear there was in the office would need to be ripped and replaced. You might not even be able to use the conduits, depending on the specifics of the floor plan.
When will one collapse? (Score:3)
Full racks are heavy. Most office buildings are built to deal with office floor loads, not computer racks. The heavy part of an office will be 5 drawer file cabinets. A 2x4 ft rack can weigh 2 tons. I wonder when the first converted building won't be able to deal with the floor loadings.
What about wiring needs? (Score:2)
I wonder could an empty office building be converted to a data center at reasonable cost. The need to high-quality power supply to all the server machines and adding in all that network wiring could cause more problems than necessary.
Remember 33 Thomas Street in New City, that tall skyscraper with no windows? Because that building was designed specifically to handle large amounts of electrical equipment with a very stable power supply to the building plus the installation of proper wiring between all that t