The “Data Center Gravity Effect” and Secaucus, New Jersey
10 Mar 2014 by Mike Allen
“As companies make the transition to Secaucus or other northern New Jersey sites, more are likely to follow. The move from New York City has begun to create what International Data Corp.’s Richard Villars called a “”data center gravity effect”” as “”companies start realizing that their data is more valuable if it’s near someone else’s data.”” With ongoing interest from local officials, investors and data center operators alike, the northern New Jersey area appears poised to enable this trend to continue, and Secaucus, with its large concentration of providers and financial firms, will likely be at the heart of it.
Spurred by geographical proximity, reduced operational costs and less exposure to natural disasters like flooding, data center operators are increasingly shifting their facilities from Manhattan to New Jersey – specifically the Hudson River-adjacent town of Secaucus. Additionally, some companies are moving their data center infrastructure from elsewhere in New Jersey to be closer to the hub that has been forming in locally. Executives have their eyes on northern New Jersey as it continues to be a major region in the nationwide data center boom.
A Thriving Regional Industry
The New York-New Jersey region is one of the top three in the country in terms of demand for retail data center capacity, according to the Wall Street Journal. According to a recent study from 451 Research, the utilization rate of data centers in the New York market is expected to reach 94 percent this year. With such high demand and limited space in the city, companies are expanding their footprints outward. And Secaucus is a leader data center locations in northern New Jersey.
According to Gus Milano, a managing director of Secaucus real estate holding company Hartz Mountain Industries, data centers account for more than 1.5 million square feet of space in Secaucus. Among the large data center operators in the town are Equinix, as well asCoreSite and Internap, both of which opened facilities in Secaucus in the last year. To local officials and real estate firms, the data center companies are welcome because they boost property values and add to the local tax base while requiring very little in terms of public services.
As a result, there is competition throughout the northern and central New Jersey region to attract data center investments – but there is also plenty of investor interest. Within the past two weeks, national data center real estate firm Digital Realty Trust announced plans to build two data centers on a site in the northern New Jersey community of Totowa, according to NorthJersey.com, while regional firm Steel ORCA broke ground on what will eventually be a 300,000 square foot data center complex in the town of South Brunswick, approximately 50 miles south of Manhattan, The Intelligencer reported.
Making The Move To Secaucus
While the data center market is strong throughout the entire region, several companies recently chose Secaucus specifically due to its range of comparative advantages over nearby sites. For instance, BATS Global Markets shifted its major BATS and Direct Edge exchanges to Equinix’s NY4 data center in Secaucus from their previous location at a Savvis facility in Weehawken, New Jersey, the Wall Street Journal’s CIO Journal blog reported. The company chose the location because it shortened transmission distances between the exchanges and other trading venues: Other Equinix customers in Secaucus include the Chicago Board Options Exchange and the New York Stock Exchange.
“”BATS understands that one of the keys to success lies not just in what you deploy, but where you deploy,”” Equinix Americas president Karl Strohmeyer said. “”In today’s networked world, financial services companies need to position their systems for maximum connectivity, performance and agility in order to keep ahead of fast moving trends. With the global network of Equinix data centers, BATS can achieve proximity hosting requirements while tapping into a financial services ecosystem with all the major market players.””
Reduced Expenses, More Resilience
BATS Global is not alone in being drawn to the new location. CoreSite, which recently opened its first data center in Secaucus, pointed to some of the challenges of operating out of New York City proper, particularly after Hurricane Sandy showed how prone the area is to natural disasters, a recent NJBiz article noted. While the company’s data centers didn’t experience downtime during the storm, executives decided they didn’t want to risk the fate of other nearby data centers that weren’t as lucky. They also recognized that ultimately the cost of ownership in New Jersey was around half that of New York City, while the connectivity was effectively the same.
“”If you look at the geography of Secaucus and Manhattan, we’re located extremely close in terms of fiber distance,”” Brian Warren, CoreSite’s senior vice president of marketing and product management, told NJBiz.
According to the Wall Street Journal, the estimated corporate electricity rates for Secaucus are around 9 cents per kilowatt hour, as compared to around 15 cents per kilowatt hour in Manhattan. Additionally, Secaucus’s industrial area is around 11 to 15 feet above sea level, making it slightly less exposed to storm damage and flooding than lower Manhattan. Some companies have also been drawn to sites farther inland, which are even more resilient in the face of disasters.
For Internap, the move to Secaucus came in the wake of its lease expiring in a Google-owned facility on Eighth Avenue in Manhattan. Growing demand for space was a compelling reason for the move, as were the lower real estate costs, a property site outside of the 500-year flood plain and proximity to three international airports, Mike Higgins, the company’s senior vice president of data center services, told NJBiz. Additionally, the site allowed Internap to “”consolidate our data center footprint in the New York metro market,”” CEO Eric Cooney explained on a call with investors.
The data center gravity effect is alive and thriving in New Jersey, and if you take a look around the data center map – you’ll notice pockets of data centers in the US and around the world, London and across The English Channel in Belgium, The Netherlands, spilling into parts of Switzerland, France and Germany, a new ground zero is forming. If the trend continues, smaller cities with 3 important traits: a history of being away from recurrent natural disasters, proximity to a major city and the use of a local power supply (and in most cases a renewal energy is most advantageous) should cause pockets of data centers and a new source of revenue in the booming data center industry.
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