In today’s corporate landscape, data centers are essential to our everyday work life. A data center can be a building, a dedicated space within a building, or a complex of buildings with the purpose of sharing and storing data. As reported by moderator of the panel, Jason Shepard, Managing Principal for Cresa MCS, there are three (3) types of data center operators:

• Enterprise data centers (EDCs) are typically constructed and used by a single organization for their own internal purposes. EDCs are typically designed to higher levels of reliability & redundancy to mitigate against downtime.
• Internet data centers (IDCs):  Also referred to as “Hyper Scale”, these are large-scale (power & size) facilities for internet &/or cloud-centric users.
• Third Party Operators (3POs):  These are purpose-built data centers to accommodate a variety of end-user types. Multi-user data centers, similar to multi-tenant buildings, are referred to as “Colocation”. Larger scale “Carrier-Hotels”, “Powered Shell” & “Wholesale Colocation” facilities may have “Retail Colocation” providers as customers. These colocation facility types may then have sub-users in "Retail Colocation” providers as well as both EDCs & IDCs as customers.

Many will recognize current software services that depend on data centers such as Microsoft Office and Amazon Web Services, that most of corporate America use every day. While it’s true that the industry has been able to condense the amount of space needed for data storage overall, virtual networks still depend on large-scale physical infrastructure – and having the space for such infrastructure can prove to be a challenge for a condensed market like Southern California.

Because of this, most businesses within Southern California depend on data centers located in Phoenix, Salt Lake City or even further away. However, this creates a problem of data speed latency. As reported by Shepard, “LA to Salt Lake City takes about 18 milliseconds (ms) round-trip, and LA to Denver takes about 27ms round-trip.” He continued, according to AFCOM’s 2023 State of the Data Center Study, “60% of users of survey respondents said that their requirements need to be under 20ms.” According to Amatis, a cloud-based services firm, a latency of 100ms can cause a 1% loss in sales and 40% of online users abandon a website if it is difficult to load within that timeframe.

How Much Power is Needed?

Shepard addressed another problem under consideration, that being the level of power needed to supply data centers. Data centers require a large amount of power, currently acquired through mostly non-renewable resources. However most states in the US are moving towards renewable resource requirements, with California specifically requiring “60% of electricity generation [to] come from renewable sources by 2030, and 100% green by 2045,” (DSIRE).” Arizona on the other hand only has a 15% renewable resource requirement by 2025 (DSIRE), resulting in a extensive data center development  in  Arizona over California.

From there, Shepard introduced panelists Yigit Bulut, technical leader and electrical designer EYP Mission Critical Facilities, Part of Ramboll, Chris Sumter, partner and EVP of Prime Data Centers, Rhea Williams, CCO of E3 Platforms, and Eric Dela Pena, director of sales engineering for Coresite. Each panelist brought unique perspectives from all around the industry, all working toward figuring out solutions for data centers long term.

Data Center Development, Site Selection and Opportunities

When deciding the right type of data center for a business, Bulut noted three things to keep in mind, “if you have goals of sustainability and energy efficiency while being conscious of capital price, you have to be cognizant of how much you are spending and how efficient the facilities will be.” He continued, “You want to maximize reliability and redundancy. Efficiency, capital cost, longevity - that hasn’t changed – it has just gotten more important.”

Williams, who was recently a Site Selection Principal for Oracle in EMEA focused on European Markets, brought forth her perspective on data center processes overseas. She added, “The large cloud public regions are dictated by customers and sales. They're going to go where customers are based.” Regions, she clarified, are single markets that refer to a specific city or geographical area. In Europe, the main concentration for data centers is tier-1 markets, which were identified as major European cities such as London, Frankfurt, Ashburn, etc. In contrast, Williams noted the highlight of the West Coast American market, “I think we do that better on the West Coast than most the other regions globally.”

On the other end of the spectrum, Dela Pena gave a local perspective, as Coresite has recently entered the Southern California market. When asked what fueled Coresite’s decision to recently look at local open and leasable space, he replied with the following:

“For us, it was an economic decision because of the low cost of power. In the state of  California, you don’t get many incentives to come into the market, but from a customer perspective, we were able to serve the needs within a short period at an incredibly low cost.” He later summarized, “this is an underserviced market and developers should probably pay more attention.”

On that same topic, LA vacancy can provide some unique opportunities for data center-purposed acquisitions. Sumter shared one of the latest unique acquisitions of Prime Data Centers,

“Luckily, we have been granted a beautiful property, that being an old post office building that was built in 1993 by the federal government. It came with high  posts that enabled mail trucks to drive on the roof to sort out mail throughout the  entire building. What does that mean? It means we can build a 3000-pound cabinet in this building that you can light up to about 15 kilowatts.”

Challenges of Price, Energy Procurement and Public Use

One aspect of the panel highlighted the historic movement to cloud data storage, what it did to the price of data centers and the growing need for more data storage. Dela Pena summarized that “when cloud adoption first came about, everyone wanted to rush to it because it required less capital and equipment.” But this came with one caveat, “It’s free to put all your data into the cloud, but it costs a ton of money to pull it back out.” This led to hybrid models, where companies would upload certain workloads to the cloud and a certain amount onsite. But this model mitigates a challenge that is still present, the current cost of data storage without many alternative options due to current limitations of energy resources and state legislation.

Later in the panel, the conversation on the challenge of energy procurement sparked up again. Sumter noted, “In this industry, energy procurement is becoming a much greater challenge.” He continued, “I don’t know what the answer is going to be, but optimistically, places like Tennesse, Oklahoma, Wyoming – tier 2 markets that two years ago I never would of invested in – now suddenly we’re looking to go out and buy property there because power is more accessible.”

One such solution that was discussed was the possibility of nuclear power. “Government approval is a question, but there is so much negative connotation that we need to change. With how far technology has come, there are ways we can use [nuclear power] safely without creating any waste,” Williams added. She believes that the growing need, even outside of data centers, for power on a greater scale will likely drive innovation in this direction. This was echoed by attendants of the panel, with one attendant stating, “Of course, I encourage energy users of solar and wind, but they’re not reliable resources for us.” Although Williams still reiterated the initiative to move in the direction of using renewable resources.

 “We do think we can eventually utilize solar as a primary resource. We’re even looking in the middle of nowhere to buy tens of thousands of acres to utilize solar power. Shepard chimed in, “There’s a social piece to this, and it aligns with a greater political conversation.”

Another question for the panel addressed the issue of accessibility to data storage overall, “Do you see the combination of data and power becoming a public utility as one?” Williams quickly responded, “It already has in Europe, and power is fed back into the overall grid. 100% - that is the direction we are headed in.” Shepard concluded the panel response by adding that with each new data center built, they are becoming far more energy efficient.

In sharing final thoughts, Bulut sent attendants home with a concluding optimistic statement, “These issues and others are ahead, and they are always changing, but what makes [data centers] exciting for us is taking on those challenges.” It’s clear that the dependency on data centers will only grow more, as with each passing day there is an increased reliance on virtual data storage. However, with all the solutions mentioned on the panel, it’s clear that a greater conversation needs to be had on making data center development and accessibility available and affordable in the state of California.