By: Andrew Hanzl

When listing out classes on commercial real estate properties, most everyone would think of the usual suspects: office, multi-family, retail, and industrial properties.  Some might even think hotels, self-storage, and senior living facilities – but how many people would think of data centers? Not many, I’d imagine!

Before I jump into the importance of data centers as an up-and-coming class of commercial real estate, let me take a step back and explain the basic function of data centers. They are physical brick and mortar buildings where equipment is stored to save and disseminate files over the internet. Data centers are quite handy as they allow users to access masses of data without having to save all the files directly to their personal device. Most current popular applications would not be technologically feasible without data centers. Now you know, for the next time you are using Netflix, YouTube, Amazon, Facebook, Google or Office 365!  As an illustration of scale: Google has 16 data centers around the world to house 900,000 servers that use 260 million watts of power, in order to function.

Data centers are unique as an asset class, most notably, because they require a tremendous amount of power to function. The power required to operate a data center is 100 times greater than that of a large commercial office building. There are about 3 million data centers in the United States alone, which range in size: from a small closet to an entire floor of an office building, to standalone facilities that are over one million square feet in size! Some distinctive features of data centers include their windowless industrial-like appearance, massive air conditioning units to keep the servers from overheating, generators capable of powering entire cities in case of power outages and advanced security systems for server security.

As a Dallas-based firm, we are in of one of the largest data center markets in the nation. The Dallas / Fort Worth (“DFW”) Metroplex is the second largest market for data centers in the United States, behind only Northern Virginia. It may surprise some to learn that the DFW is ahead of Chicago, New York, and the Silicon Valley – this is primarily because it can provide power at a lower cost than any other major market in the United States. Further, the DFW metroplex also offers fiber optic accessibility, low risk of natural disaster, a centralized location, lower labor costs with respect to facility construction, and finally, strong cooperation from local officials in approving new projects.

One exciting data center construction project that is currently being developed in Fort Worth will be the social media giant Facebook’s largest data center to date. The project, once completed, will be 2.5 million square feet in size and comprised of 5 buildings on 150 acres of land. It will cost $1 billion to construct and will be the fifth largest data center site in the United States. Further, this facility will be fully powered by renewable sources of energy; Facebook has partnered with several energy companies to provide enough wind energy to power the entire facility, and the buildings will be cooled by outdoor air rather than indoor air conditioners.

As the role of technology continues to grow in all aspects of our lives, the need for data centers is only going to continue to increase. If you would like to learn more about data centers or would like assistance to secure the finances to develop a data center, please contact Andrew Hanzl at ahanzl@metcapital.com.

The Author, Andrew Hanzl, is a Senior Analyst in the Dallas office of Metropolitan Capital Advisors.