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Dated space, but demand high

Data center retrofits keep valuable properties from becoming obsolete

With data center construction still going strong in New Jersey, a growing amount of older space is now hitting the market, as companies seek more modern buildings. But data center providers are acquiring and retrofitting older assets to accommodate current technology and power demands.


It is more economical for a smaller data center company to renovate an existing property than build a newer facility, says Philip Koblence,
vice president of operations at
New York Internet.

“Anything 10 years old or more is a dinosaur,” said Jeffrey Prezant, a director at commercial real estate brokerage Cushman & Wakefield. “Corporations keep using up the power we have in data centers; it makes data centers antiquated.”

Outdated space “can’t work with the present demands of the market,” said Will Steffens, major account manager at Newark-based PSE&G, which helps data center companies locate space in New Jersey. Between 60 to 80 percent of the state’s 10 million square feet of data center space has been constructed in the last four years, he said.

An obsolete facility may measure about 75,000 square feet and require 50 watts of power per square foot; a new property might be 150,000 square feet, and require 150 watts a square foot, Steffens said. “With greater density, you generate more heat, so now you need more cooling … which is power, as well,” he said.

Older data centers also were designed differently — they were located in office buildings, with raised floors of 12 to 18 inches in height, Prezant said. Newer centers are “just plain big boxes” with floor heights of 36 to 48 inches, in order to blow enough air to cool the massive pieces of equipment on the floor.

Older facilities have started “to come on the market over the last year, and they’re getting looked at,” Prezant said. These include Quality Technology Services taking over a former NTT data center in Jersey City, and Fiber Media redeveloping a facility previously occupied by TD Bank, in Secaucus, he said.

Prezant also is marketing 450,000 square feet of available space at Convergence, a five-building data center and disaster recovery complex at 115 S. Jefferson Road, in the Whippany section of Hanover. JPMorgan Chase had operated two buildings at the complex as a data center for more than 20 years, but it has relocated to a new, 250,000-square-foot data center it constructed in Carlstadt; the company is keeping only 120,000 square feet of the more than 450,000 square feet it had once occupied on the campus, Prezant said.

But while large corporations are leaving older centers, “there’s different tiers of the market,” Steffens said. These facilities can still cater to local firms that do not have heavy power demands and require only connectivity or backup for their facilities, he said.
Older data centers are obsolete, but “it’s very expensive to build a new data center right out of the box,” Prezant said. “If there’s some infrastructure you can use, you’re already ahead of the game, economically.”

With an existing facility, a data center provider is able to get a building to market more quickly than with new construction, Steffens said. “It’s got a raised floor, it’s got a chiller plant, it’s got zoning, it’s got approvals to run as it does,” he said.  
That allows small providers to achieve a faster return on investment, said Phillip Koblence, vice president of operations at data center company New York Internet. Large firms constructing new centers “are not going to get the payback from the buildout for a number of years,” he said. “A company like ours doesn’t have the benefit of waiting years and years for a payback on a buildout.”
In October 2009, New York Internet purchased a 40,000-square-foot former ADP data center at 999 Frontier Road, in Bridgewater, and spent the subsequent seven months renovating the facility. Upgrades included removing the building’s original 12-inch raised floor and replacing it with one that was double in height, increasing the data center’s capacity to 150 watts per square foot and improvements to its cooling system, he said.

Larger providers also are taking a look at existing facilities. In 2009, Town & Country, Mo.-based Savvis leased a 209,000-square-foot data center at 1919 Park Ave., in Weehawken. The center’s previous tenant — a financial institution that an insider identified as Citigroup — shed the space in a major property consolidation.

The building “made complete sense,” said Mike Simms, vice president of global data centers at Savvis. 1919 Park Ave. was located close to another Savvis data center in Weehawken, and the infrastructure and mechanical systems had been upgraded. “From a cost perspective, there wasn’t much we had to do,” he said.

While the building was Savvis’ first existing data center project in New Jersey, “we would certainly consider” older facilities again, Simms said. “It’s an engineering and business decision that would dictate if it was the right move.”
But not every facility is suitable for an upgrade, Koblence said. Power capacity “is really what you look for when you’re dealing with whether or not it’s worthwhile retrofitting one of these centers,” he said.

999 Frontier Road is at about 30 percent capacity, serving some 100 companies, Koblence said. “In this economy, sales cycles are fairly extended,” he said. “There’s a lot of back and forth and due diligence for companies to do before they can physically set up shop.” He expected the center to reach 50 percent capacity by the end of the year and 75 percent in 2012.
While data center providers are continuing to build new facilities in New Jersey, filling that space “becomes the challenge,” Steffens said. “You’ve got to find the users, you’ve got to compete. There is demand, but until you fill space, how true is the demand?”

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