Expansion Continues for CRG West

The way John Savageau sees it, the recent sale of Landmark Los Angeles carrier hotel One Wilshire will simplify his life. Savageau is managing director of CRG West, the Carlyle Group subsidiary that had been managing the building, which includes both telecom and office tenants. When one of the law offices or the bank on the first floor has a problem, they now can turn to the building's new owner Hines REIT, freeing Savageau to focus solely on managing the more than 170,000 square feet of data center space at One Wilshire.

And there's plenty of data center business for CRG West, which has been steadily increasing its national footprint of data center and carrier hotel properties over the last two years, as well as building its meet-me-room and interconnection business. Last month CRG leased 50,000 square feet of space of 32 Avenue of the Americas in Manhattan for its first New York City facility. In May it bought the 70 Innerbelt in Somerville, Mass. and 427 LaSalle in Chicago.

CRG West now operates more than 2 million square feet of carrier hotel and data center space in nine facilities in Los Angeles, San Jose, Chicago, Boston, Miami and Washington, D.C. as well as New York.
It recently expanded its neutral Internet exchange service, Any2Exchange (PDF), into its buildings in Chicago, Miami and Washington.

But Los Angeles and One Wilshire remain, in many ways, the hub of CRG West's data center business. "In Los Angeles, we can't put space up fast enough to meet customer demand," said Savageau. "Our first phase of the Wilshire Annex is sold out. As soon as we put it up we sell it."

The Wilshire Annex is a 450,000 square foot facility that was once the city's main post office building, which CRG West is developing in phases. The first phase came online this summer, and the second is expected to be ready for tenants in late fall. There's also growth opportunities at One Wilshire, where CRG West will continue to run the fourth floor meet-me-room, support 170,000 feet of customer space, and convert part of the first floor for data center use. CRG will continue to own the mechanical improvements in the building, including generators and conduits it installed. "The customers will see no change," said Savageau.

The East West Bank is consolidating its space on the first floor of One Wilshire, which will vacate 15,000 square feet. The space has tall enough ceilings that CRG is considering a mezzanine approach to create two tiers of data center space.

Savageau said procuring additional electric power isn't as big a challenge in Los Angeles as in other cities. "Los Angeles actually has good power availability," said Savageau, noting that L.A. Department of Water and Power is the local utility. "If you can justify it, the city will deliver it."

CRG West continue to look at expansion opportunities, especially in the Washington, D.C. market. "We have to expand in Washington or see business pass us by," said Savageau. "In our case we may look at Northern Virginia, but Maryland is also underserved between Baltimore and Washington. I think we're looking at the entire area, but we really prefer downtown D.C. What makes downtown Washington attractive now is that we are getting a lot of interest in the interconnection facilities and services."

Savageau said CRG West continues to look in other markets as well, focusing on properties that can be converted to data center use. "With enough due diligence, you can find buildings," he said. "Our data center in Milpitas (in Silicon Valley) was an old MCI site that was never commissioned. Our Miami site was a WilTel termination that was never completed. If you look hard enough for those types of facilities, they're still out there. Over the last year, we've done pretty well."