Companies want to pay $600 or more per square foot to locate their gear close to high-priority data centers in New Jersey that host the Nasdaq and the New York Stock Exchange, a rate four times the cost of square footage across the river in Manhattan, according to the New York Times, which covered the price differential as part of a story on Equinix and other data center operators.
The story shows that, like in all real estate, finding a home for your servers is all about location, location, location. In this case, it’s not school districts or an urban core drawing customers — it’s proximity to data. As we’ve explained, there are benefits to locating auxiliary data and services in close proximity to big repositories of financial data. It can keep latency (and bandwidth costs) low, while making big-money trades as speedy as possible and rapid data analytics as close to real time as can be.
The law of data gravity at work in New Jersey, where major data center construction and expansion has been forecast, has also played out to some extent in northern Virginia, where Amazon Web Services’ (s amzn) US East infrastructure runs, as well as in New York, even with the superstorm Sandy.
Beyond reporting the New Jersey phenomenon, the Times shows that the circumstances are ripe for data center operators such as Digital Realty Trust (s dlr) and Equinix (s eqix) to function as quasi-utilities, even though they are not regulated as utilities. They negotiate power deals with utilities and then resell power to customers that want to run servers inside the data centers. And the data center companies can post robust profits when customers agree to pay for, say, double the amount of power they typically use.
As much as those profits might bode well for Equinix and their ilk, power could turn out to be an issue. Energy costs could increase, and outages can happen, but also, as the article points out, demand for power, in New Jersey and elsewhere, could keep increasing beyond the capacity of the data centers, which means that the data center companies might not be able to use their facilities completely effectively.
It could be that data gravity begets data center construction. If that’s the case, places such as New Jersey could see data center construction for years to come.