Data Center Construction Going Strong

Here's a statistic that quantifies the ongoing boom in data center construction: a SearchDataCenter.com reader survey found that 82 percent of respondents planned to expand their data center operations in 2007 or 2008. Twenty two percent of the 211 survey participants are currently expanding their data centers, while 60 percent have projects planned for 2008.

In an accompanying blog item, SearchDataCenter's Matt Stansberry adds additional color. Fifty four percent of the new data centers will be stand-alone construction, while 46 percent of projects will be attached to mixed-use buildings. But Matt wonders if it's too good to be true:

It's a provocative question, and one I hear often. The memories of the boom-bust overbuilding cycle during the dot-com bubble continue to haunt many analysts and industry veterans. But the answer to Matt's question is found in his survey data.

Eighty five percent of those surveyed said they planned to implement server virtualization in their new data centers. That indicates that these companies understand the advantages of virtualization and consolidation, and are building new space anyway. In many cases, this is because their existing data centers can't handle the power and cooling challenges of high-density server environments. To capture the benefits of virtualization, they need to build new data centers. In the corporate data center sector, virtualization is a driver of data center construction. Those attached data centers are very likely to be for the companies' own use, rather than a hosting facility.

The impact of virtualization and consolidation is somewhat trickier to sort out in the multi-tenant data center space, where companies like Equinix (EQIX), Savvis (SVVS), Digital Realty Trust (DLR), Terremark (TMRK) and DuPont Fabros (DFT) are all in building mode. All of these companies say they are tracking demand closely, and say their construction plans are driven primarily by demand from new customers. As virtualization sweeps the IT industry, these companies believe many of the companies that can't afford to build new data centers will lease space in their facilities to outsoruce their virtualized environments.