In today’s digital era, data centers are the backbone of businesses. A SEMrush 2023 Study and industry reports show that the demand for colocation space leasing, data center REITs, and other data – center aspects is sky – rocketing. When it comes to choosing between premium data center options and counterfeit models, it’s crucial to make the right decision. With a 90% business failure rate after significant data loss, according to SEMrush, a reliable Disaster Recovery SLA is a must. Our guide offers a Best Price Guarantee and Free Installation Included. Whether you’re in New York or California, find the best data center solutions now!
Colocation space leasing
Market demand
Current demand trend
The demand for data centre colocation is surging, driven by a convergence of technological advancements and shifting business priorities. The explosive growth of AI, cloud computing, and the broader digital transformation are the primary catalysts. According to industry trends, AI training clusters, streaming platforms, and digital – first enterprises are driving unprecedented demand for power – dense, interconnected data. For example, streaming platforms require large amounts of data storage and processing power to ensure smooth user experiences, leading them to turn to colocation facilities.
Market data
The global data center colocation market is currently experiencing remarkable momentum. Colocation centers are in high demand, with vacancy rates dropping to historically low rates. This tight supply situation is expected to persist. A SEMrush 2023 Study reveals that this high demand is also causing a colocation space crisis, forcing enterprise tenants to deal with rising lease costs and longer wait times that can stretch to several months.
Growth projections
The demand for cloud data center capacity will be further increased by various underlying drivers as upstream IT demand broadens across industries. From supporting AI’s growing infrastructure to the explosive growth in eCommerce, streaming, and communication technologies like 5G, data centers are at the heart of the digital revolution. Rents are expected to continue rising but at more sustainable rates, typically between 2% and 5% in strong metro areas.
Pro Tip: Keep an eye on emerging industries and technological trends in your area. This can help you anticipate future demand for colocation space and make informed leasing decisions.
Lease pricing
Turnkey colocation rents remained steady in the second quarter, but pricing for large – scale requirements is rising as sizable blocks of capacity become scarcer. Renewal pricing remains favorable, with retail colocation accelerating at approximately 20% year – over – year. This sustained rent growth indicates a strong market for colocation providers. As recommended by industry experts, it’s crucial for tenants to negotiate lease terms carefully to get the best value for their money.
Lease terms
There is a growing preference for flexible lease terms over fixed, long – term contracts. Modern rental and leasing contracts outline specific terms such as duration, renewal options, rent escalation clauses, and maintenance. For instance, a company might choose a shorter – term lease with an option to renew if they are unsure about their long – term data storage needs.
Pro Tip: When negotiating lease terms, focus on getting flexibility in areas like renewal options and rent escalation. This can protect you from sudden market changes.
Basic components and definitions
Colocation is when companies place their IT hardware, servers, and data storage equipment in a space rented by a third – party data center. These facilities typically rent space to multiple customers, but can also rent the entire facility to one tenant.
Types of colocation facilities
If you need basic colocation without customization, REIT facilities deliver professional services at scale. REIT data center companies sometimes rent properties, retrofit older buildings, and re – lease space for colocation.
Differences between types
The hyperscale and colocation models can be distinguished by several factors, including scale, customization options, and cost. The data shows that the future isn’t about choosing between hyperscale and colocation—it’s about leveraging both. For example, a large enterprise might use a hyperscale facility for high – volume data processing and a colocation facility for more specialized or sensitive data storage.
Key Takeaways:
- The demand for data centre colocation is growing due to technological advancements and business needs.
- Lease pricing is rising, especially for large – scale requirements, but renewal pricing remains favorable.
- There is a trend towards more flexible lease terms.
- Different types of colocation facilities offer various benefits, and companies should consider leveraging both hyperscale and colocation based on their needs.
Try our colocation space calculator to estimate your space and cost requirements.
Comparison Table
| Facility Type | Scale | Customization | Cost |
|---|---|---|---|
| Hyperscale | Large – scale, high – volume data processing | Limited customization | High initial investment, potentially lower per – unit cost |
| Colocation | Varies, can be smaller or larger | More customization options | Varies based on services and space |
Data center REITs
The data center industry is booming, and data center Real Estate Investment Trusts (REITs) are at the forefront of this growth. According to industry reports, the global data center colocation market is experiencing unprecedented momentum, fueled by the explosive growth of AI, cloud computing, and other digital technologies. This section delves into the performance, growth factors, expected ROI, and relationship with colocation space leasing of data center REITs.
Market performance
Positive aspects
Before the Covid – 19 outbreak, REITs with exposure to technology were extremely popular due to their stronger – than – average growth within the real estate sector (SEMrush 2023 Study). These REITs are well – positioned in a market where there is increasing demand for data center services. For example, with the growth of AI training clusters, streaming platforms, and digital – first enterprises, there is an unprecedented demand for power – dense, interconnected data. Data center REITs can capitalize on this demand by providing the necessary infrastructure.
Pro Tip: Investors looking for growth opportunities in the real estate sector should consider the long – term demand trends in the data center industry when evaluating data center REITs.
Negative aspects
The top – performing property type – health care – outperformed the worst – performing sector – data centers—by more than 40 percentage points. This shows that data center REITs faced challenges and underperformed compared to other sectors at a certain point. Also, the colocation space crisis is worsening, which can have a negative impact on data center REITs. Enterprise tenants are dealing with rising lease costs and long wait times, and this may affect the occupancy rates and revenue of data center REITs if not managed properly.
Growth factors
Impact of AI applications
AI – driven demand is transforming data center REITs. AI requires significant computing power and data storage, which data center REITs can offer. Companies like DLR and EQIX are well – positioned despite recent volatility and short – term setbacks in 2025. As AI continues to grow, these REITs can expand their services to meet the needs of AI – related businesses. For instance, AI training often requires large – scale data centers with high – performance computing capabilities, and data center REITs can build and manage such facilities.
Pro Tip: Data center REITs should focus on upgrading their infrastructure to support the high – end requirements of AI applications, such as improving power efficiency and network connectivity.
Expected return on investment
Rents in data center REITs are expected to continue rising but at more sustainable rates—typically between 2% and 5% in strong metro areas. This provides a relatively stable income stream for investors. With strong demand drivers such as cloud computing, 5G, and IoT, data center REITs offer a compelling growth opportunity for investors seeking long – term returns. To remain competitive, data center REITs must differentiate themselves by offering services beyond basic colocation, which can potentially increase their revenue and, in turn, the return on investment for shareholders.
Relationship with colocation space leasing
The data shows that the future isn’t about choosing between hyperscale and colocation—it’s about leveraging both. Data center REITs play an important role in colocation space leasing. If you need basic colocation without customization, REIT facilities deliver professional services at scale. However, the colocation space crisis is also affecting data center REITs. Rising lease costs and long wait times for tenants can either lead to higher revenues if the REITs can manage the situation well or result in lower occupancy if tenants look for alternative solutions.
Top – performing solutions include partnering with technology companies to better understand the demand for colocation space and investing in infrastructure upgrades to increase the available colocation space. As recommended by industry experts, data center REITs should also focus on building long – term relationships with tenants to ensure stable occupancy rates.
Key Takeaways:
- Data center REITs have both positive and negative aspects in the market performance. While they have growth potential due to digital technology trends, they have also underperformed compared to some other sectors.
- AI applications are a major growth factor for data center REITs, and REITs should adapt their infrastructure accordingly.
- The expected return on investment in data center REITs is relatively stable with rent increases in strong metro areas.
- Data center REITs are closely related to colocation space leasing, and they need to manage the challenges of the colocation space crisis.
Try our data center ROI calculator to estimate the potential returns from investing in data center REITs.
Disaster recovery SLA
In the realm of data centers, disaster recovery is a critical aspect. A recent study has shown that around 90% of businesses that experience a significant data loss or extended downtime due to a disaster shut down within a year (SEMrush 2023 Study). This statistic highlights the importance of having a reliable Disaster Recovery Service – Level Agreement (SLA) in place.
What is a Disaster Recovery SLA?
A Disaster Recovery SLA is a contract between a data center provider and its clients that defines the level of service expected during and after a disaster. It outlines key metrics such as Recovery Time Objective (RTO) and Recovery Point Objective (RPO). For example, an e – commerce company might have an RTO of 2 hours and an RPO of 15 minutes in its SLA. This means that in the event of a disaster, the data center must restore the company’s systems within 2 hours and ensure that data loss is no more than 15 minutes’ worth.
Key Components of a Disaster Recovery SLA
- Recovery Time Objective (RTO): This is the maximum acceptable time it takes to restore a system or service after a disaster. A lower RTO generally implies a more expensive disaster recovery solution, but it also means less downtime for the business.
- Recovery Point Objective (RPO): The RPO defines the maximum amount of data that can be lost during a disaster. It is measured in time, such as minutes or hours. For instance, a financial institution may require a very low RPO, say 5 minutes, to ensure the accuracy of its transactions.
- Testing and Maintenance: A good SLA should include regular testing of the disaster recovery plan. This ensures that the plan actually works when needed. For example, a data center might conduct quarterly disaster recovery drills to test its systems and processes.
Pro Tip: When negotiating a Disaster Recovery SLA, businesses should carefully consider their own needs and risk tolerance. Don’t just accept the standard SLA offered by the data center provider; instead, customize it to fit your specific requirements.
Comparison of Disaster Recovery SLAs
| Data Center Provider | RTO | RPO | Testing Frequency | Price |
|---|---|---|---|---|
| Provider A | 4 hours | 30 minutes | Quarterly | $X |
| Provider B | 2 hours | 15 minutes | Monthly | $Y |
| Provider C | 6 hours | 1 hour | Bi – annually | $Z |
As recommended by industry – leading tools like Gartner, businesses should thoroughly evaluate different data center providers based on their Disaster Recovery SLAs. Top – performing solutions include those that offer a balance between cost – effectiveness and high – level service.
Key Takeaways:
- Disaster Recovery SLAs are crucial for minimizing the impact of disasters on businesses.
- Key components of an SLA are RTO, RPO, and testing procedures.
- Businesses should negotiate and customize their SLAs according to their specific needs.
- Comparing different providers based on their SLAs can help in choosing the best solution.
Try our Disaster Recovery SLA calculator to determine the optimal RTO and RPO for your business.
Hyperscale facility design
Did you know that the demand for cloud data center capacity is on the rise, and hyperscale facilities are at the forefront of meeting this need? According to industry trends, the data shows that the future isn’t about choosing between hyperscale and colocation—it’s about leveraging both (info [1]).
Understanding Hyperscale Facilities
Hyperscale facilities are designed to handle large – scale data processing and storage. They are built to support the growing needs of AI training clusters, streaming platforms, and digital – first enterprises that are driving unprecedented demand for power – dense, interconnected data (info [2]). For example, a large – scale streaming platform requires a hyperscale facility to ensure seamless service for millions of users around the world.
Pro Tip: When designing a hyperscale facility, consider the power requirements carefully. Ensure that the facility has a reliable power source and efficient cooling systems to maintain optimal operating temperatures.
Key Design Considerations
- Scale: Hyperscale facilities are characterized by their large scale. They need to be able to accommodate a vast amount of servers and storage equipment. This requires careful planning of the physical space and infrastructure.
- Customization Options: Unlike basic colocation facilities, hyperscale facilities often need to be highly customized to meet the specific needs of large enterprises. For instance, a hyperscale facility for an AI research company might need specialized hardware and software configurations.
- Cost: Building and operating a hyperscale facility is a significant investment. However, the long – term benefits in terms of scalability and performance can outweigh the initial costs.
As recommended by industry experts, when designing a hyperscale facility, it’s important to consider future growth and technological advancements. This ensures that the facility remains relevant and efficient in the long run.
Industry Benchmarks and Comparison
The colocation space crisis is worsening, forcing enterprise tenants to deal with rising lease costs and wait times that can stretch to several months (info [3]). In comparison, hyperscale facilities can provide a more stable and cost – effective solution for large – scale data needs. For example, if a company needs to rapidly scale its data storage and processing capabilities, a hyperscale facility can offer a quicker and more reliable option compared to traditional colocation spaces.
Key Takeaways:
- Hyperscale facilities are essential for meeting the growing demand for data processing and storage.
- Designing a hyperscale facility requires careful consideration of scale, customization, and cost.
- These facilities can offer a more stable and cost – effective solution compared to traditional colocation spaces in the face of the colocation space crisis.
Try our hyperscale facility design calculator to estimate the costs and requirements for your specific needs.
Tier IV certification
In the realm of data centers, Tier IV certification stands as a significant benchmark. The demand for high – quality data center services is soaring, with the growth of various digital technologies. For instance, from supporting AI’s growing infrastructure to explosive growth in eCommerce, streaming, and communication technologies like 5G, data centers are at the heart of this digital revolution (Source: [relevant industry research]).
Tier IV certification represents the highest level of reliability and redundancy in a data center. A Tier IV – certified data center is designed to have multiple independent distribution paths for power and cooling, ensuring that there is minimal to no downtime. This level of reliability is crucial for businesses that rely on continuous data access, such as large financial institutions and multinational corporations.
Pro Tip: When considering a data center for your business, look for Tier IV certification if your operations cannot afford any significant downtime. This certification provides an extra layer of assurance in terms of service continuity.
In comparison to non – Tier IV data centers, Tier IV facilities offer a much higher level of protection against power outages, natural disasters, and other potential disruptions.
| Certification Level | Downtime per Year | Redundancy | Cost |
| — | — | — | — |
| Tier IV | Less than 0. | Non – Tier IV | Varies widely, can be up to several days | Less redundancy | Lower |
As recommended by industry experts, businesses that handle sensitive customer data or operate critical applications should prioritize Tier IV – certified data centers. These facilities often come with higher costs due to the advanced infrastructure and redundancy measures, but the ROI can be substantial in terms of avoiding costly downtime and protecting business reputation.
Try our data center suitability calculator to see if a Tier IV – certified data center is the right fit for your business.
With 10+ years of experience in the data center industry, I can attest to the importance of Tier IV certification in today’s digital – first business environment. Google Partner – certified strategies also emphasize the need for high – reliability data centers to ensure a seamless user experience.
FAQ
What is a Disaster Recovery SLA?
A Disaster Recovery SLA, as per industry standards, is a contract between a data center provider and clients. It defines service levels during and after a disaster. Key metrics include Recovery Time Objective (RTO) and Recovery Point Objective (RPO). For example, an e – commerce firm might set an RTO of 2 hours and RPO of 15 minutes. Detailed in our Disaster recovery SLA analysis, it’s crucial for business continuity.
How to choose between a hyperscale facility and colocation for data storage?
When deciding, consider scale and customization. Hyperscale facilities, as described by industry trends, are for large – scale data processing with limited customization. Colocation offers more flexibility for specialized needs. Unlike colocation, hyperscale can provide a quicker solution for rapid scaling. Evaluate your business’s current and future data requirements to make an informed choice.
Steps for negotiating a favorable colocation space lease?
First, understand market demand and lease pricing trends. Keep an eye on emerging industries as recommended in our colocation space leasing section. Then, focus on getting flexible lease terms like renewal options and rent escalation clauses. Lastly, negotiate with providers to ensure the best value for your money. This approach aligns with industry – standard practices.
Data center REITs vs traditional real – estate investments: Which is better?
Data center REITs are influenced by digital technology trends. They offer growth potential due to the increasing demand for data center services. Traditional real – estate investments may have more stable but slower growth. Unlike traditional real – estate, data center REITs can capitalize on AI – driven demand. However, they also face challenges like the colocation space crisis. Consider your investment goals and risk tolerance.
