Of particular interest to utilities seeking to attract data center development in their service areas...
I've noted announcements from several of the largest utility-scale data center operators (like Microsoft and Apple) indicating that their build-out strategy is increasingly aimed at expanding existing sites rather than seeking new locations. That's not great news for utilities looking to attract these facilities as part of their economic development activities.
Now Data Center Dynamics reports that the outlook for the wholesale colocation market is decidedly mixed for the short term, with some apparent overcapacity. In something of an ironic twist, the report notes that some of that capacity is due to large operators moving out of colo into their own facilities.
The textbook example in my mind is Facebook, which began their life in retail colo space, migrated to wholesale, and now of course operate their own centers. This has left a hole in the Fortune Data center in San Jose, though Facebook appears to be on the hook under a long term lease.
Some big leases were signed last year, and some big increases in available space are expected in 2014, but I'd guess that the big wholesale players (Digital Realty, Dupont Fabros, etc) will be treading very carefully in considering new development.
I'm also intrigued that Microsoft signed a few leases last year, but for comparatively small blocks of capacity (all under 10 MW). I'd posit two possible explanations.
The first is that Microsoft may lease small blocks to align their growth against their own capacity, filling in near term shortfalls with the leased space. The second is that the small increments may be the best way to address service latency requirements in locations that aren't near company facilities.
I'm told Microsoft is looking to have some capacity in every city with a professional sports team, simply to meet the latency requirments for it's Xbox system!
I still think that a utility that can put together a package of low rates, capacity availability, short time to service, and a clean generation mix (or access to it) will attract attention from both owner-operators and the wholesale colo market. However the trends of expanding existing sites by the owner-operators, and short term overcapacity in the wholesale market are headwinds that have to be overcome.