Corporate Office Properties Trust’s recent acquisition of the $115 million “Power Loft” data center is just one illustration of an emerging dual focus on both square footage and megawatts in commercial real estate.
The 233,000-square-foot Power Loft is 16% leased, long-term, to two tenants who have a combined initial power commitment of 3 megawatts and further expansion rights of up to a combined 5 megawatts of critical power.
Increasingly, COPT’s customers are interested not only in square feet but in critical power – the kind that supports rapidly expanding computer networks, cybersecurity setups and even future power-hogging tech products that are yet to appear on the scene, said COPT CEO Rand Griffin.
“As part of just leasing to our tenants, they started coming to us and asked if we would start to build data centers,” he explained.
For companies like COPT, the move to purchase more data centers represents a significant financial commitment. Griffin estimated that data centers cost around $1,200 per square foot to build, while “normal” office space costs up to $300 a foot.
“We’ve been trying to figure out a way to correctly take advantage of investing additional money to create what they call ‘wholesale data centers,’” he said.
‘Very Technical Business’
The need for power – and the reliable, high-speed access that accompanies it – has become vitally important for emerging information technology (IT) companies, reflected Ruth Temple, president of the Maryland Business Incubation Association.
“Think about the implications for, say, health care IT. It’s really hard to overhaul health care IT if you don’t have the power and infrastructure where you need it, if you don’t have the Internet accessibility, affordability and consistency,” she said.
At the same time, when conceptualizing office space and power, it’s difficult to project the needs when the IT industry moves more rapidly than anyone can guess, said Griffin.
“Part of the biggest risk is potential obsolescence of design, and part of the dilemma has been trying to figure out the appropriate design,” he said. “A typical office building has 5 watts of electric per square foot. Now, state-of-the-art is moving toward 150 watts a square foot, with a capacity up to 300 watts a square foot.”
Prior to the acquisition, Power Loft LLC, founded by James F. Coakley, was the operating company providing development management, property management and leasing services to the data center.
With the Power Loft purchase, COPT has now partnered with Coakley, who has the data center expertise COPT needs to make the deal work. “I think the problem is that it’s a very technical business. You can’t just say, ‘we’re a real estate company, now let’s go to data centers,’” said Griffin.
Data centers not only are difficult to finance, they are difficult to design. “You’ve got to be a substantial company like us,” said Griffin, “and you need to have the expertise. Very few real estate companies are doing this.”
Tenants Beware
For small companies seeking office space in which there is no built-in data center, it’s important to weigh the availability and cost of broadband Internet access, said Steve Kolbe, an IT managing consultant for All Covered.
“Work with a qualified technology consultant to evaluate the service options available in your space before signing the agreement,” he said.
Depending on the tenant’s requirements, installation of Internet services may take months, pointed out Kolbe. “Service providers are often unable to accommodate requests for an accelerated installation schedule. This should be one of the first orders placed when making a move.”
Even Mobile Teams Need a Home
Will increased technological mobility actually decrease the general need for office space? Not dramatically, reported small business owners, because even the most mobile employees need a place to store their stuff and a place to work together.
Lily Bengfort began CenGen, which specializes in wireless and mobile communication technologies, in her home, then had to look for office space.
“There is still a need for space for people even though everyone is mobile. There are times when we need people to meet at a place where anyone can sit down to work. Depending on the type of business, there is always stuff that needs to be stored or used that will need space. We have to work as a team many times even though all of us are very mobile,” she said.
