As hyper-scale cloud requirements have become more prevalent over the last twelve months, a number of trends have emerged. While each hyper-scale cloud requirement is different, all are trending with the similar characteristics noted below:

1 - Hyper-scale cloud companies needs are large

The requirement size of cloud companies today are larger than the market has ever seen, creating welcomed challenges for data center operators tasked with delivering power to accommodate the large amounts of needed capacity. These end users are betting significantly on future cloud demand.

2 - Hyper-scale cloud companies need capacity immediately

A primary reason colocation has become an acceptable solution for these requirements is because of the speed at which data center operators are delivering capacity today. In addition, many data center operators have been aggressive in securing land sites for future growth, ensuring a faster pathway to delivering a solution for companies that would otherwise have to acquire the site themselves.

3 - Hyper-scale cloud companies lease capacity in major data center markets

While companies leasing large amounts of infrastructure still have requirements focused in rural US markets, they have pegged major US markets like Northern Virginia, Silicon Valley, Chicago, Dallas and Phoenix for their most recent hyper-scale requirements. These markets not only offer a competitive colocation supply and a quicker path to delivery, but are also within close proximity to customers served by these locations. We anticipate this trend to continue.

4 - Hyper-scale cloud companies lease capacity with new data center providers

Many of these hyper-scale cloud companies have had relationships with data center operators prior to these large transactions coming to the market. In fact, many of these companies focused on placing their infrastructure with only one or two providers, in efforts to create synergy, efficiency, and leverage for aggressive pricing on future requirements.

Today, that strategy has changed. Many of the transactions completed recently were won by different data center providers. In addition, several of these hyper-scale cloud companies are focused on using different operators in different markets.

5 - Hyper-scale cloud companies open to unique lease structures

Because many of these transactions are dictated by size and speed to market, the end users are open to creative lease structures and the most efficient way to bring capacity online quickly.

• Pre-leasing of planned facilities – Several of these users have pre-leased existing plans held by the data center operator for a site in the given market.
• Pre-leasing of new facilities – Several of these users have pre-leased concepts of what the facility will be, allowing the data center operator to begin site preparation while additional details are determined between the data center operator and the end user.
• Pre-leasing of shell facilities – Several of these users considering pre-leasing shell facilities on a “NNN” rent basis, with the ability to convert the lease to a “$/kW/mo” lease structure once the infrastructure is needed. They are choosing to view the shell “NNN” rent as a reservation fee until the the critical capacity is needed, allowing a pathway to a faster infrastructure delivery timeline.