I believe there are some misconceptions reported regarding the cost of building a new data center. Mostly, I read about costs ranging from $1,000 to $2,000 per sf. I’m not sure where these numbers are coming from (could they be from the colocation folks themselves)? In practice I’ve seen TIER 3 rooms as small as 5,000 sf at 150 W/sf for under $600/sf. There’s no doubt that higher heat loads are more costly, but unlikely to the extent that makes renting less costly. After all, someone is making money or they wouldn’t be in the business. Certainly, companies look at cost of money, and having manpower to manage them, however, with the high cost of colocation which will only increase, will large users (5,000+ sf) really be hoodwinked into long term large spaces.

It would be great to see a true, third party analysis of the true apples-to-apples cost to own and operate a data center v. lease…recognizing this varies by region based on real estate cost, this too could be factored in, and showing results for a variety of cities. Perhaps if the real costs were exposed there would be a significant effect on the expansion of the industry.

Watching some of the new startups basically spin up with some code and a bunch of EC2 instances, they can scale to the point when they need datacenter space, they go pretty large (look at twitter as an example).

Mark, many IT management folks need to take people on tours of their data center. If they are a startup, Investor types, VCs, other companies, etc. If they are established, it’s to show their management they have real stuff. For some reason, having a data center in Kansas is too scary for folks.

A shocking number of people are server huggers. I always ask our clients, “How often does your staff go into the data center?” If the answer is anything more than “very rarely”, I ask, “What are they doing there?” If people tell me they go touch their gear daily, or worse still, multiple times daily, I *really* want to know what they’re doing, especially if they also tell me that their infrastructure is mostly virtualized. Much of the time, IT management has no clue what their staff is doing in there, but they’re insistent that they’ve got to touch that stuff and so need to be close. (I mean, I encounter clients where I say, you’re virtualized, you’re not adding capacity daily, you’re not augmenting your existing hardware with more RAM or more drives or whatever, you have remote power management, what could your staff possibly be *doing* in there?)

The other thing I continue to scratch my head on is the ‘commute distance’ point. Unless you are a data center operator there arent many reasons to set foot in a facility maybe 3 times a year. The lack of office space, the time spent there is typically concentrated, and the fact that once the gear is in, a remote hands reboot should be about it. I would be curious to see how many of those companies who want to watch their lights blink have utilized remote management tools and associated best practices to the fullest.

Cloud starts to introduce obsalescence up the stack at the app layer so that will be fun to watch, although to me Cloud is just an accounting exercise.

1. Yes, absolutely, power and not space is becoming the primary limiting factor, especially as virtualization shrinks footprints. Floor loads are generally secondary to this, since in many cases if this is my issue in an enterprise data center, I have enough space to spread my gear, and I’ll probably run out of power first. There’s substantial net-new space needs that are being driven by “the data center I have is obsolete and I need to replace it”, but most of the customers with that problem go into a lease or build arrangement, rather than colo.

2. Leasing has become very, very hot over the last 18 months. There still aren’t enough high-density data centers available (either in the colo or lease markets), but it’s a very modest percentage of overall demand.

3. Colocation pricing in general has been, and is likely to remain, volatile, and the smaller the market the more volatile it gets. The financing you cite plays into it. So does where someone is in their fill; we continue to see pretty aggressive opening specials, for instance, which can temporarily depress prices in an entire metro market.

4. Leasing prices have lots of room to move upwards because of the longer term cycle of leases. Colo contracts are usually only 2 to 3 years; the trend towards 5 years is very recent. So 2010 and and 2011 renewals will mainly be for deals signed in the 2007-2009 timeframe, and pricing has bounced around a fair amount but isn’t, in most places, wildly above 2007 levels. When we see straightforward same-provider renewals right now, it’s often at right around the same price point as the previous contract; if the customer is willing to move, they can often get lower prices within the same city.

I agree that ROFO/ROFR is a factor in hot markets, and can be a factor in other markets as well, depending on where the data center is in its fill.

The big growth trend we see these days is in the lease and the wholesale side of the market, rather than retail colocation. What is capping the leasing and wholesale side is supply, rather than demand. I have a ton of clients who would really like turnkey space in their local cities (because they usually plan to seat their IT staff alongside the data center), or who would like it within closer commute distance of their offices in a major metro market.

Remember that the non-hot markets are not necessarily rural; Maine is a poor example in that regard. They’re simply second and third-tier cities, often “NFL cities” with a solid population of businesses.

Also, I think companies will figure out ways to “virtualize” some of their needs in order to save the power/space footprint.