The Basics of Data Center Site Selection

Lee Coleman, VP, Real Estate
May 16, 2017

How do companies like Digital Realty decide where they are going to build their data center facilities? Space is obviously a consideration, but it’s not the only one. There are a variety of other important economic and geographical factors that go into the decision to build a new facility or build out an existing facility into a data center.

With our world becoming more reliant on data centers all the time, new data centers are being planned and built every day. We thought this would be a good opportunity to share some of the basic criteria we look for when choosing a site for a new data center.

Location, location, location. We are a real estate investment trust, and investment in property has always been an integral part of our business. And when investing in any property, location is key in ensuring reliable operations and profitability. Some of the basic things we look for are potential for natural disasters, climate, and other potential environmental hazards. A location with room for expansion is certainly a positive.

Power. Since power is the primary cost associated with operating a data center, procuring it plays a considerable part in site selection. How mature is the grid that we plug into? Do we have access to multiple grids? What rates will we pay? Is there existing infrastructure for alternative power, or can we get involved in building it? How we procure electricity for the facility will determine a good deal about the site we ultimately choose. Sustainability is also a key factor we look for in order to manage our environmental impact. We recently signed a long-term contract to purchase the output from an 88 megawatt wind farm which supplies enough renewable energy to power our entire U.S. retail colocation business and we will continue to take these steps towards creating more energy-efficient data centers.

Infrastructure. Much of the power of the data center lies in its ability to provide connectivity for its customers. So we look for existing infrastructure that helps information flow. For example, what kind of fiber access is there and what is its proximity? What providers are in the area? Is there a large base of potential customers and employees? Latency is also a critical factor.

Additional Costs. There are several additional costs that are variable, depending on location. One is tax rates as some states or counties have instituted favorable tax incentives for data center projects. Construction, labor availability, and raw material costs are also important.

We hope this blog has helped provide a basic picture of what we look for when considering a site for a new data center. Want to learn about more about our interconnected global network?

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