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Commercial Real Estate

Anthony Bolner: Leasing Vs. Building Data Center Space

For these mission-critical facilities, it's important to evaluate the solution from all angles before reaching a final outcome.
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A decade ago, for companies looking at losing or building data center space, the answer would have been easy: build. Back then, colocation services were not an ideal solution for companies. There was too much risk associated with colo to make it a viable part of the data center strategy for many users. Times have changed, though, and today, colo provides scalable solutions for businesses that overcome the risks of the past. With that being said, there are still instances where it makes sense for a company to consider hosting its own IT infrastructure and applications.

Top Benefits of Leasing Data Center Space

Leasing data center space provides a more consistent and predictable cost model and can help providers reduce capital expenditures when compared with building and operating their own facility. Leasing data center space also provides increased flexibility, especially when it comes to resource and asset management. For instance, if a company finds that they need more space and computing power, it is relatively easy to scale up without needing to pay considerable build-out costs up front.

Additionally, recent data center research shows that many IT and computing giants are opting for a hybrid approach, where service footprints are split between owned and leased facility space. Despite owning their own data centers throughout the U.S., and across the globe, big name service providers including Apple, Facebook, and Microsoft, have also been leasing space for many years and continue to keep much of the leased space in their data center portfolios.

Top Advantages of Owning a Facility

When companies build their own data centers, they have complete control over nearly every aspect—from the overall facility designs down to the granular operational details like temperature control and asset access. Companies that develop and operate their own data center space can also build out their resources in a phased and/or modular approach to manage capital deployment.

Cost Considerations

A primary factor that separates leasing and building data center space is the varied costs associated with each approach. When companies look to build their own facilities, there are a number of up-front expenditures to keep in mind, including:

• Planning, design, and commissioning expense

• The price of purchasing land and building materials

• Data center infrastructure and network connectivity costs

• Security equipment expenditures

• Staffing expenditures

• Annual maintenance costs and soft services related to upkeep

• Property taxes

When facing a decision of whether to lease or buy data center space, it’s important to evaluate the solution from all angles before reaching a final outcome. Ultimately, the decision will come down to your financial resources and timeline.

Anthony Bolner is managing director and partner of Stream Data Centers.

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