Could technological improvement cause the demand for data center space to slow because storage capacity can grow without the need for more bricks and mortar? In the last 30 years, with the advent of the microprocessor, we have used in our professional and personal lives all of the computer and data-processing power that science will give us. I marvel at the demand we create for data storage whether it is content, video or music or to comply with regulatory requirements, even private stuff and things as commonplace as email. There is so much demand for IT services, we have a hard time seeing a slowdown. Technical capabilities do march on, but we don’t see any gamechanging technology. It is more an evolutionary process than a revolutionary process. It seems as though there are more data-center developers competing than ever before. Is that true? It is very regionalized like any real estate. So there are a few developers with private capital that have been building one or two projects, but few that have done stuff on a broader or regional basis. DuPont Fabros [Technology Inc.] is in multiple U.S. markets and CoreSite [Realty Corp.] is in several markets. But like all real estate, it is very fragmented. Not many people are doing it on a broader basis, and no one like us. It is challenging from a capital perspective. These buildings are expensive to build, and there is little financing available. And you have to have a lot of technical expertise. We have well over 200 people in our company who don’t come from a traditional real estate background. Many of our customers need solutions in multiple markets and to be truly successful on a broader platform you need a big investment.
What do you see going forward? We see demand being pretty sustained for data-center solutions and the growth in IT. The rate of growth slows from time to time, but we see the demand from new applications, for expanding existing applications, from continuing regulatory requirements especially in the financial services world and the impact of the media. We think the media, content distribution and the use of the cloud, those are fundamental changes, and we see those driving growth for more data centers. We like the large U.S. market, but we think having a diversified portfolio works well for us because you get ebbs and flows in local markets, but you can move capital around to meet demand in different locations. We see Asia-Pacific as a very exciting area for growth, and we are making our first significant investments in Sydney and Melbourne, and we are looking hard at Hong Kong. We are sticking to major markets but with the build-to-suits we also can have flexibility around geographic locations. We can’t ignore the macro environment, but the good news about information technology is that it is productivity-enhancing and cost reducing, so even in challenging times there is a place for growing IT. Q
LEFT: Michael Foust (left) is joined by Texas Gov. Rick Perry and the mayor of Richardson, Texas, for the ceremonial opening of Datacenter Park in Dallas, one of the largest data center complexes in the United States.