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The State Of The New York City Data Center Market

The demand for data centers in the New York metro area continues to grow, even as rents climb and the white space added each year continues to dwindle. Recent industry research reveals the state of the New York data center market as booming, but with increased interest in the surrounding region. However, facilities within the city itself face rising rents, high costs for power, and aging equipment.

New York is one of the four biggest data center markets, alongside San Francisco, London, and Tokyo. Finance and marketing and advertising drive much of this demand, but the area is the financial engine of the country and other industries are well represented. There are over 16 million square feet of white space in New York, which is around 14% of the entire United States data center real estate.

1547 gathered these statistics from the Data Center Dynamics Metropolitan Hub Series: New York Report, which can be purchased in full here. It also reveals that despite increasing demand in the city, only 115,000 square meters have been added in the past three years.

separate report from Open Spectrum found that, according to CBRE and the Bureau of Labor Statistics, rents in New York City for tech office space increased 17% from 2010-2012. Adding additional data center space within the city is an expensive proposition.

NYC Data Centers Old, Dense, and Risky

While latency remains a vital consideration especially for financial institutions, data centers within the boundaries of New York City are 15 years old on average. Even as densities have increased and power use skyrockets for New York data centers, those shopping for colocation or cloud hosting within the area would be wise to consider the age of their provider’s facility.

Nearly a quarter of data center operators in the Tri-State region colocate physical servers in a third-party facility. When cooling and support equipment is 10 years old, those workloads are at risk.

The higher power use in New York compared to the rest of the country (about 15% greater for data centers) may be a result of avoiding high rent costs and virtualizing or increasing rack density, but these practices have become widespread throughout the nation. It is just as likely that these older data centers are also less efficient, costing operators monthly as they consume greater amounts of energy.

New York remains a fairly safe location as a whole from natural disasters, but Hurricane Sandy is still strong in the memory of natives.

“Sandy exposed the region’s risk and the extensive damage hurricanes and related disasters can cause, as a number of large commercial data centers lost power due to flooding or related factors during and after the storm hit,” reads the Open Spectrum report.

Lack of Incentives and High Power Costs

The final factors pushing operators towards upstate New York, New Jersey, and Connecticut include a lack of data center investment incentives and high power costs. Commercial energy on in NYC is close to 14 cents per kWh, while in surrounding counties it can be as low as 10 cents.

Open Spectrum also claims that “neither New York nor New Jersey offer sales tax incentives that affect data center owner/operators or their clients” as of July 2014. However, 1547 and Bloomberg have both recently secured sales tax exemptions and other incentives for new data center developments in Rockland County.

These factors all contributed to our site selection process when developing our Orangeburg, NY data center. Lower property costs, lower electric rates, and sales tax incentives all help us provide attractive pricing to our customers, while the site safety and connectivity are superior or comparable to sites within the city.

As more and more operators look to third-party providers for data center white space, the areas nearby but not within New York City will become more and more attractive.