The North Virginia data centre market, based just south of Washington DC, is one of the most important in North America and this recent review from US based specialist data centre brokers WiredRE is worthy of reading (and my thanks to Everett Thompson for his permission to add comment).

What I found especially interesting is the similar trends they are seeing that we have oft commented about here in the UK colocation market.

Key features:

  • WiredRE reckon 2m sq ft of NEW capacity has been added to the Ashburn data centre market over the past two years – this compares to the Colo-X estimate of the entire UK COLOCATION market of 3.8 million square feet (note: our figure doesn’t include wholesale sites though and is “net tech”).   To put this expansion into context, WiredRE estimate the entire North Virginia data centre market, including both wholesale, retail, carrier neutral and carrier owned facilities will offer some 8m sq ft of GROSS capacity by the end of 2014, so 2m sq ft is a hefty increase.
  • Still, 2m sq ft is remarkable growth indeed and I think the key point here, is that capacity can be expanded – as the saying goes: where there is a will, there is a way!  But this is in contrast to what many established colocation operators would like people to think “new entrants can’t find sites with power or planning permission, or don’t have access to network” is a typical statement that we hear mentioned; well in North Virginia and indeed the UK and Europe, given the growth we are seeing, that statement simply doesn’t hold true and growth figures such as these reinforce this point.
  • The North Virginia market is in modest oversupply, in WiredRE’s view.
  • Wholesale pricing in the range of $125-$145 per kW per month (this is excluding power costs) – this figure seems remarkably similar to “wholo” colocation pricing that we are seeing here in the UK, with pricing for even small scale colocation deals from wholesale operators at the £200 per month INCLUDING power, so about £120-£130/kW month x power.
  • Retail colocation pricing “under pressure” – WiredRE stress premium ecosystems are able to maintain a price premium over the those retail operators with less proven ecosystems of 20-40% per kW per month, ie pricing of $400-$500 per kW month in the premium markets facilities versus $300-$400 per kW per month from the less established operators.  I think what’s important about this is how closely it resembles the market in the UK – in other words high value ecosystems are indeed able to maintain a significant price premium in the market but that if you don’t need to colocate in such a facility, for instance if you don’t need to access a trading exchange for low latency reasons, then you are crazy to paying such a high premium when equally good quality capacity is available in the market today at a significantly lower price per kW.

As we keep stressing, its time for data centre users to start thinking more “tactically” about how they deploy their data centre estate;  yes, use the ecosystems where you have to, but only deploy those kW that need to be there (as the pricing is so high) and place the rest of your estate in facilities costing half the price per kW!  What is so significant about the market today is that there is indeed viable and credible options in the market, both in the UK and Virginia, a contrast to the situation only four or five years ago when in the UK for instance we only had a cluster of facilities from around 5 operators all in London Docklands.

As final note I think one point that surprised me when discussing the North American data centre market with WiredRE is that overall Equinix’s market share isn’t as high as I thought.  Yes, they are easily the dominant carrier neutral colocation provider, but they also compete against a lot of carrier owned colocation, for instance from AT&T, Savvis or Level3.  There are also some growing carrier neutral competitors, including names such as Carpathia, Latisys, Peak10 and Ragingwire.  And finally, as we are now seeing here in the UK market, there is increasing competition for retail colocation from wholesale operators; Digital Realty is a reasonably familiar name already here in Europe, but in the US there are companies such as CyrusOne, Coresite or DuPont Fabros.

If you wish to contact WiredRE please do let me know and I’ll be pleased to put you in touch or alternatively via their website at www.wiredre.com