The Houston Data Center Market

The Houston Data Center Market

Five years ago, the Houston data center market looked dramatically different. Made up of mostly enterprise data center users at the time that owned and operated their own facilities, colocation users needing to be in Houston had to locate in either downtown or in one of the few colocation facilities located throughout the market. As the colocation market matured and Houston’s economy grew, data center operators delivered quality facilities and solutions to meet the demand.

Areas like Greenspoint, The Woodlands, and Katy have been recipients of the growth by major data center providers, including Digital Realty, CyrusOne, Stream Data Centers, Skybox Datacenters, and Data Foundry. Data center users find the Houston market as an acceptable place to house their data because of the friendly business climate, the increased colocation/cloud competition, and the maturity of the colocation market.

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Power Overview

Multiple power providers are active and competitive in the Houston market for large data center user opportunities. The Electric Reliability Council of Texas (ERCOT) is responsible for managing 90% of the electricity in the state of Texas. Among the contiguous 48 states, Texas is the only one that has a standalone electric grid entirely within the state. Texas does not participate in the interconnected power grids serving the eastern and western United States. With few exceptions, Texas produces the electricity consumed within its borders and therefore is not subject to the Federal Power Act, a Depression-era law where the Federal Power Commission oversees all interstate electricity sales. In 2002, the State of Texas introduced competitive electric markets. Deregulation created a system where electric generation and supply is a retail business competing for customers while the transmission (often the incumbent owners of power lines) remains heavily regulated. In Houston, data center providers typically negotiate with multiple retailers for lower rates but most of the transmission lines are owned and operated by CenterPoint Energy.

Connectivity Overview

Houston benefits from the presence of more than 20 fiber providers, many of which have both long haul and metro lines serving the area. Companies like Alpheus, CenturyLink, Cogent, EarthLink, FiberLight, Level3, Sprint, Verizon, Windstream, XO, and Zayo have long haul fiber making loops that connect Houston to Dallas/Fort Worth, Austin, and San Antonio. Telecom giant AT&T (headquartered in Dallas) has a direct line from Houston to Dallas. Most fiber providers in the Houston market have constructed and delivered their infrastructure across the northwestern quarter of the Houston metroplex. Several large data center operators, such as Data Foundry, Cyrus One, and Skybox Data Centers, have built large data centers in this area. Other providers, like Windstream, have placed their fiber infrastructure in and around Sugar Land, to the southeast. Blanketing the entire city is fiber infrastructure from Phonoscope.

Hazard Risk Overview

Data center users are generally aware of two risk areas in the Houston market: hurricanes and flooding. While hurricanes generally do not hit Houston directly, the rains generated from the hurricanes can occasionally cause flooding issues that impact the city. Data center providers build in areas out of the flood impact areas, and now design the facilities to withstand high powered winds from threatening weather.

Houston DATA CENTER MARKET OPTIONS

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