Boston’s Supply of Data Center Space Stable Amid Rising Demand

We continue our series of stories on the leading geographic markets for data center space. Data Center Frontier is partnering with DatacenterHawk to provide in-depth market reports on each city we profile. Read on for research results on Boston’s supply of data center space and rising demand. 

Download the full report here.

Data center requirements in Boston come in a variety of sizes, but most are below 500 kW. Companies with needs larger than that size are typically well established companies with a need to be in the Boston area.

The region’s knowledge economy is anchored by the more than 50 colleges and universities in Boston, which provide a highly educated high-tech workforce as well as a steady supply of entrepreneurs seeking to commercialize their research.

Some of the largest data center users include major hospitals and research institutes, who have extensive IT requirements and typically want to store data close to their Boston facilities, either for latency purposes or to comply with patient data privacy regulations. Some of these users have meaningful high-performance computing (HPC) operations that require higher power densities than traditional IT operations. This creates an opportunity for data center providers with facilities that can support HPC.

The biotechnology and pharmaceutical sectors in Boston are the largest in the nation. Proximity is very important for these customers, both for latency and the concentrated nature of the workforce in these sectors in the Boston area. Many top doctors and medical researchers are based in Boston, and have considerable influence over the location of the IT infrastructure supporting their research.

Boston’s active startup ecosystem also creates demand for data center services. There are more than 1,800 startups in the Boston area, according to a 2016 survey by the U.S. Chamber of Commerce. The region’s startup sector is largely focused on SaaS (software as a service) applications, which require third-party infrastructure.

Some of these startups will select major cloud platforms to run their infrastructure, but others are working with local data center providers. Power pricing in the Boston market may limit the upside potential of data center requirements from fast- growing startups. When companies grow larger and need wholesale data center scale, they often opt to expand in a market with cheaper power costs, such as Northern Virginia.

Importantly, Boston’s startup sector is anchored by a resident community of venture capital and private equity firms. These investors’ presence in Boston is likely to ensure a vibrant startup scene for the foreseeable future, even as some startups grow, relocate or are acquired.

Several niches offer the prospect of future demand for data center capacity in the Boston area.

The “industrial Internet of Things” (IoT) looms as a potential growth driver in light of the decision by GE to relocate its headquarters to Boston’s Seaport District to tap into the area’s vibrant technology ecosystem. GE sees a huge opportunity in software and services to support the industrial IoT. The company says Boston’s concentration of elite research universities is a factor in its relocation from Fairfield, CT.

Boston’s supply of data center space is relatively stable, owing to the size of the market and the existing providers’ ability to support the demand for space from local customers.

There may also be an opportunity in providing local services to hyperscale providers like Google, Facebook, Amazon Microsoft and Oracle. These companies all have engineering offices in the region that may need low-latency access to IT infrastructure for testing and development.

Trends in Supply

Boston’s supply of data center space is relatively stable, owing to the size of the market and the existing providers’ ability to support the demand or space from local customers.

While there has been limited new construction, several Boston data centers have changed hands in the past year. In mid-2016 Lincoln Rackhouse acquired a data center at 34 Martin Street in Marlborough, which has several service provider tenants. In January 2017, data center REIT Carter Validus paid $37 to purchase an Andover facility that is fully leased by two service providers.

The Akamai Network Operations Center in Kendall Square oversees the content delivery specialist’s enormous global network. (Photo: Akamai)

Downtown Boston

Data center development in Boston finds its way to both the downtown and outer suburbs of the city, a trend seen in other US markets as well. Because downtown areas are typically rich in both power and fiber infrastructure, these areas typically offer converted office buildings providing shell lease opportunities from data center operators.

Downtown Boston is home to Markley Group’s massive carrier hotel, offering colocation, cloud, and connectivity services. The data center provides access to over 80 network providers as well as the Boston Internet Exchange.

Cogent, CoreSite, and Internap all operate data center facilities located on Innerbelt Road, which is in close proximity to downtown Boston area as well.

CoreSite is in the process of adding 13,735 square feet of capacity at its B01 data center at 70 Innerbelt, a 253,000 SF building. The $7 million expansion is expected to be completed in third quarter of 2017.

Also in expansion mode is Expedient, which just completed a $4 million project to add 8,000 square foot of data center space at its Medford facility.

Suburbs and Route 128

Digital Realty is the area’s largest provider, with about 40 MW of capacity spread across two multi-tenant facilities in Needham and another in Bedford. The huge data center REIT also owns two fully-leased data centers in Waltham. CenturyLink has a cluster of three data centers in Waltham, totaling about 150,000 square feet of space.

Iron Mountain has a data center in Northborough, which was built in collaboration with Compass Datacenters.

The Boston market also has several smaller players that specialize in edge computing or target secondary markets. These include Tierpoint, which operates data centers in Charlestown, Marlborough and Andover. EdgeConneX, which typically works with content companies, has a site in Billerica. ColoSpace, which targets business customers in New England, operates facilities in Somerville, Waltham and Bedford.

In upcoming stories, we will continue to explore aspects of the Boston data center market, including the factors driving data center market growth and the current business environment.

For more on the Boston market, we invite you to download the Data Center Frontier Special Report: The Boston Data Center Market, sponsored by Digital Realty.