U.S. Colo Costs Are Soaring, says Report
A lack of suitable facilities space in the US is forcing carriers and ISPs to pay nearly 40% more to house their network equipment than six months ago. This is the conclusion of the latest quarterly market report from Band-X Co-location, the independent co-location marketplace.
For the first time, prices on the Band-X exchange indicate that it is more expensive to house equipment in a carrier-neutral co-location facility in the US than in Europe. Price stability in Europe has been helped by the rapid construction of a number of large facilities. Typically European build-outs remain significantly larger than those in the US.
A co-location facility is a secure, specialised building where telecoms companies can house the equipment needed to run their networks, and interconnect with each other. A 'fully-serviced' building comes complete with the power, fire-control, air conditioning, etc. needed to house the equipment - which is mounted in standard-sized racks.
The new Band-X figures show the price of a rack in a fully-serviced facility averaging $892 in the US today, 37% more than six months ago and 14.2% more than three months ago. A similar rack in Europe costs an average of $800 - a drop of 4% over the last six months.
The speed of development in the European market is illustrated by the fact that the amount of space available in London has shown a 100% compound growth each year for the last four years. Today that trend appears to be accelerating. Band-X expects that in Milan, a notoriously difficult location to buy co-lo, space will be available by the fourth quarter and predicts over a million square feet of fully service co-lo will be available in Spain by the end of the year - up from 25,000 square feet now.
In the US, it is the lack of large volumes of fully-serviced space that is driving prices up, according to Tim Anker, director of co-location at Band-X. "The US co-lo market has to-date relied on real estate companies offering raw space in suitable buildings for tenants to fit-out themselves. Today, with lead-times for equipment shortening, we are seeing a surge in demand for prepared, fitted-out co-location space. Many facilities are sold before they are even finished."
The typical size of a US facility is around 20,000 square feet: "In general the size of facilities in the US is less than half the average European build," added Anker.
"The disparity between supply and demand has left US co-lo providers scrambling to keep up with an increasingly buoyant market," said Rick Hourigan, strategic account manager, Band-X US.
"This is not simply a question of newer, better capacity coming on stream and costing more in the US - we are seeing existing suppliers increasing their prices, as demand continues unabated," added Hourigan.
However, volume of available space is set to increase shortly and Hourigan believes: "There are large builds taking place in first, second and third tier markets and in both traditional and non-traditional marketplaces. Strength of demand, however, makes it difficult to predict when US co-location price increases may flatten out."