In-house data centres disappear into the cloud

For the first time, the amount of property dedicated to in-office data centres is set to fall as organisations increasingly move their IT processing out of their premises and off to ‘the cloud’.

The result for property managers was spelt out at a recent conference in Sydney, with DCD Intelligence forecasting the space required by outsourced data centres will grow by an average of 8.3% a year through to 2018.

IT analysts Gartner Inc. estimate half of all private organisations will move to the cloud or ‘co-lo’ (co-location) by 2017.

For the uninitiated, the cloud refers to hosting data and software in someone else’s centre and accessing it over the internet. In a recent report, KPMG found businesses can derive a number of advantages from moving to the cloud, including cost savings, process efficiencies and better access for a mobile workforce.

You can save money & improve process by switching to the cloud.

Like all technology-sourced disruptions, this concept was slow to gain acceptance at first but is now being widely embraced.

Game changer: Put your business in the cloud

Office worker

Apple leads the charge

It’s a global trend benefitting properties suited to the growing number of specialist centres. One of the world’s largest belongs to mega brand and rapidly growing content provider, Apple. The US group, which runs three massive facilities in California, announced this year it will spend US$1 billion upgrading its North Carolina centre which will end up covering over some 74 hectares.

The shift to the cloud is throwing up big opportunities for local businesses as well. The success of a new breed of Australian operators is in part thanks to the organisations leading the race to the cloud; governments, banks and insurance companies. These groups are often constrained from offshoring data thanks to privacy rules and customer perceptions, ruling out the mega centres emerging in the US and Asia.

Take the five year old NextDC, which operates five centres across Australia. The group’s results showing revenue rocketing up 3600% in the last three years, and requiring a $250 million investment in property acquisition and fit out costs.

The location of those five centres provides some valuable insights into the property preferences of this new sector. While NextDC’s Sydney centre is positioned in the high tech cluster of Macquarie Park, their largest facility at Fishermans Bend covering 6,000sqm is in an industrial zone just five kilometres south of Melbourne’s CBD.

Finding cost competitive locations close to the city is a common theme amongst Australia’s 91 outsourced data centres. Global giant Equinix chose Sydney’s inner south for its 11,500 sqm campus, while Over the Wire operates two centres in Brisbane’s Fortitude Valley and Spring Hill.

The shift to the cloud promises to be a boon for some owners but it is likely to produce plenty of challenges for others.

For one thing, data centres are notorious for their ability to consume power and generate heat. So spare a thought for Australia’s small army of facilities managers who will be faced with an array challenges as they struggle rework their buildings’ electricity contracts and climate control systems.

 Half of the 450,000sqm of commercial property dedicated to in-house IT will become vacant.

For portfolio managers, the trend could prove just as challenging. If Gartner’s forecast proves correct, half of the 450,000sqm of commercial property dedicated to in-house IT will become vacant.

That will leave hundreds of office buildings putting custom-built floorplates in to the sub-lease market at the same time as demand for hard to let industrial buildings gets a boost.

Award winner: Green gong for company with head in the cloud