This piece is an excerpt from a recent interview with Lawrence Vo, a Bullpen freelance analyst and data center expert. In the interview, we discussed Lawrence's background as well as views on data centers and the multifamily market.
A data center stores, manages, and disseminates data.
Most data centers are owned and operated by the same business. Companies like Amazon and Google will lease space from a data center for their retail cloud platforms (Amazon Web Services, etc). Small companies typically go through a cloud based solution like AWS or Google to get access to database space.
If a company is big enough, they can lease data space directly from a data center.
Yes, but they also lease space from other, wholesale data centers.
Yes and no. The data center operator will pre-lease storage to large companies like Facebook, Google, and Amazon. However, they will also provide data storage on demand to large companies who prefer to not go through the traditional cloud providers (ex. Amazon or Google).
A data center houses data. The data gets there through fiber cables. Choosing a location for a data center is no different than being on a major exit off a highway for retail. It’s all about efficiency … being close to a high traffic fiber lines. The goal is to minimize the distance data moves between point A and point B.
Ashburn, VA near DC or Silicon Valley near San Jose. There are certain exchange points that are very valuable because they are high traffic. Chicago and Dallas are high valued exchange points. Fiber lines tend to follow old rail lines. Some of the most trafficked fiber lines are in places like Dallas where there was an intersection of multiple rail lines. Dallas is a data center hot spot because its fiber lines connect to South America. It’s all about connection points.
Anywhere from $20 million up to $1 billion, based on the size of the data center.
Yes, for the most part. The data center development business started out in the public markets as it allowed for easier access to capital. Private equity has recently shown interest and is pouring money into data centers. Running a data center is a very technical operation, so many private equity firms are creating funds with operator partners.
The primary risk in data center investing is a lack of knowledge. If you don’t know what you’re doing, you’re not going to be successful. However, data typically isn’t being eliminated, so the volume of data (and thus demand for storage space) isn’t getting any smaller.
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