Tuesday, October 25, 2011

TeleGeography: Service providers scramble to keep up with colocation space demand

TeleGeography: Service providers scramble to keep up with colocation space demand
By Sean Buckley

Despite the poor macroeconomic environment, data center and colocation space continues to be filled up a rapid pace, driving more service providers to increase their respective footprints organically and through targeted acquisitions.

Results from TeleGeography's new colocation survey revealed that as of September 2011, there was only 16 percent of retail colocation space available in the Washington, D.C. area, down 30 percent from the same period in 2010. Likewise, vacancy rates declined 36 percent in other major markets such as New York and 26 percent in London during the same period.

New York, in particular, saw the largest gain with over 1.3 million square feet of new colocation space being built between September 2009-2011. Meanwhile, service providers in Hong Kong and London added over 400,000 square feet of new colocation space followed by San Francisco, which added 300,000 feet.

Led by major carriers including AT&T (NYSE: T), CenturyLink (NYSE: CTL), Windstream (Nasdaq: WIN) and Verizon (NYSE: VZ) in addition to a host of specialized players like Telx, it appears that the colocation growth trend is going to continue.

"It's unlikely that the pace of expansion will slow anytime soon," said Jon Hjembo, a TeleGeography analyst. "While operators are adding capacity, vacancy rates in a number of metro markets we surveyed remain under 25 percent."

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