If you are considering the lease of a data center in the US, then the old real estate cliché still holds some value: it’s all about location, location, location. In fact, the location of a new data center can significantly impact an organization’s bottom line – in some cases to the tune of $12 million over the life of an average lease term.

That’s according to a recently published analysis by commercial real estate giant CBRE, which conducted an analysis of 23 key US markets.

When controlling for variables and assuming an average lease term of seven years, the study showed that Atlanta was the least expensive market to lease a data center, followed by Colorado Springs, Northern Virginia, Portland, and Seattle. The evaluation also showed that Boston was the most expensive market to lease space for data centers, with Des Moines, Kansas City, Northern Florida, and Omaha rounding out the bottom five.

The most important variable costs related to location were rent, availability of power, and taxes.

Analysis from CBRE’s Data Center Solutions unit shows that “wholesale data center inventory is steadily increasing across primary and secondary markets in the US to keep up with growing demand.” The firm’s data show that data center inventory, measured in megawatts, increased 31.3 percent between Q2 2013 and Q2 2014, with approximately 107.3 MW currently under construction.

This trend merges with a recent prediction from analyst firm IDC, which foresees growth in the data center market through 2017, when the total number of data centers around the world will peak at 8.6 million, followed by a gradual decline.

Whereas the number of data centers will decline, according to the analyst firm, global data center space will continue to increase, as the market evolves from smaller and internally managed on-premise facilities to more massive data centers managed by large service providers.

An analysis from Cisco supports this emerging trend; the company’s recently published Cloud Index predicted that more than three-quarters of workloads will be run in cloud-based data centers by 2018.

Regional Tastes
The cost of leasing data center space in the US can vary significantly depending on region, and the CBRE analysis found that the least expensive markets offered the lowest lease rates, in addition to having below-average total tax payments.

When viewed from a geographical perspective, significant cost differences emerge. With the exception of Northern Florida, the Sun Belt states offered the lowest cost, along with the Pacific Northwest. Conversely, cities in the Northeast through the Rust Belt of the Upper Midwest had overall higher costs over the seven-year evaluation period.  

There was a $12 million difference in leasing costs between Boston (most expensive) and Atlanta (least expensive) when analyzing a seven-year, 1MW data center lease. But regional differences are not consistent, CBRE warned, and financial decisions over whether to lease or build a new data center will depend on many variables.

“The opportunity to preserve capital will remain available so long as the leased data center site selection process carefully considers the primary cost variables of rent, power and taxes, and recognizes the variability that exists from market to market”, the firm advised.

“The site selection process for an owned data center, meanwhile, will hinge more on the relative costs of power, real and personal property taxes, sales taxes, available incentives, land costs and construction cost variability.”