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Market Insight: San Francisco Bay Area’s Data Center Ecosystem

San Francisco Data Center Market

The San Francisco Bay Area is a densely populated region in the US state of California, home to heavy industry, oil and shipping in the East Bay, and high tech innovation and development in the Silicon Valley.

Accounting for one third of all the venture capital investment in the United States, the region attracts many of the world’s Fortune 500 tech companies, including Apple, Google, Cisco, HP, Intel, eBay, Symantec, Oracle, Netflix and Salesforce.

The Silicon Valley Leadership Group reports that technology firms also account for 26% of the local workforce.

National and international connectivity is provided by legacy carriers including Sprint, AT&T and Verizon, as well as newer carriers such as Cogent, CenturyLink, Integra, Electric Lightwave, Level3, Paxio, Telepacific and Zayo. The Bay Area has an extensive and reliable electrical grid, however energy costs are high and local power companies encourage the use of renewable energy such as wind, solar and biomass to reduce costs.

Earthquakes are one of the region’s greatest natural hazards, prompting service providers and data center operators to invest significant capital towards constructing facilities that can cope with large seismic events.

Despite the region’s expensive power and real estate costs, and the ever-present risk of earthquakes, the Bay Area has grown to become the third-largest data center market in the USA (behind Washington DC and Dallas), with 120 data centers, 355 service providers and nine network fabrics.

Based on a combined data center density and connectivity score, the Bay Area earned the #7 spot in Cloudscene’s Fast 50 Markets to Colocate in 2018.

The most connected colocation data centers in the Bay Area are predominately operated by Equinix who occupy the top three spots and a total of six from the top ten ranking generated using Cloudscene data:

  1. SV1 – Equinix
  2. SV8 – Equinix
  3. SV5 – Equinix
  4. 200 Paul Avenue – Digital Realty
  5. SV1 – CoreSite
  6. SV2 – Equinix
  7. SV3 – Equinix
  8. 365 Main Street – Digital Realty
  9. SV4 – Equinix
  10. 2820 Northwestern Parkway – Digital Realty

This ecosystem-style ranking is unique to Cloudscene and is calculated based on the number of known service providers in each facility.

Equinix’s SV1 data center takes the number-one spot, connecting its customers with 131 providers and three network fabrics. Major service providers in the facility include Zayo, Colt, Level 3 Communications, Cogent Communications, Verizon, AT&T and CenturyLink.

San Francisco is the first US city to commit to connecting all citizens to fiber-optic broadband. In 2017, city officials revealed ambitious plans for a $1.5 billion citywide municipal Internet network that will deliver 1GB connectivity to all residents. The plan is expected to be profitable as long as more than 50% of the city’s population registers for the new service.

If the project succeeds, it will deliver unprecedented opportunities to the city, sparking innovation and growth. “Bridging the digital divide is right for our residents and right for the future of our city,” said San Francisco’s late Mayor, Ed Lee.

Robust demand for cloud-scale solutions in the Bay Area has prompted Supermicro to introduce the region’s first 3MW, clean energy, automated rack integration facility at its Silicon Valley campus. The new state-of-the-art, clean energy facility will increase the company’s rack capacity by 600 racks per month.

In October last year, Wave Broadband, a leading provider of fiber and broadband services, completed a series of infrastructure upgrades in the Bay Area to help boost local data center connectivity.

The firm upgraded its fiber backbone to multiple 100GB circuits, which connect the Bay Area to its three local facilities:

“At our core, we are all about connecting local infrastructure to the cloud and broader internet with low latency, high quality and cost-effective service,” said VP of Data Center Services, Derrick Hofmann.

Wave is also in the process of merging with two other organizations to become country’s 6th largest Internet and broadband services provider.

Demand for data center space is at a premium in the area due to limited supply of land, and data center operator, Vantage is one of the few operators to increase capacity recently, having completed its new 9MW facility in Silicon Valley in October last year.

Vantage also announced this month that is has used securitization financing to raise $1.1 billion (approx. £790 million).

The company revealed that half of the funds will be used to construct new facilities in Santa Clara and Northern Virginia, whilst the remainder will pay off bank credits.

Silicon Valley’s data center vacancy rate is only 5.3%, one of the lowest rates in the United States, which means data center tenants have few options when it comes to securing floor space. Vantage has also recently purchased another large tract of land nearby in preparation for a second campus.

Digital Realty already operates 22 data centers in Silicon Valley, and is planning to add a new 6MW facility in Santa Clara this year. The two-story, LEED Gold-certified building will cost $75 million to develop, and will include 10,500 square feet of office space:

“The new facility offers a comprehensive set of data center solutions, from single-cabinet colocation and interconnection requirements, all the way up to multi-megawatt deployments,” said Digital Realty CEO, A. William Stein.

In recent months, Internet giant Google has occupied three San Jose properties as part of a large-scale expansion in the Bay Area. Google paid $117 million for the three industrial buildings – 563,000 square feet in total – located in the Midpoint Business Park. Google is also purchasing office properties in downtown San Jose, which could eventually accommodate up to 20,000 Google employees.

Finally, Microsoft has acquired 64 acres of San Jose real estate, as the company makes plans for its own large data center in the region. Microsoft is weighing up two options for the land – a four-story 49MW data center or a light industrial development. Any proposed facility would first require environmental approval, with particular consideration given to sustainable water usage:

“We continuously explore opportunities to meet the needs of a future based on cloud computing and Internet services, so we’re thrilled to find a great one in the heart of Silicon Valley,” said Christian Belady, General Manager of Microsoft Cloud Infrastructure and Operations.

To find data centers in Silicon Valley, San Francisco or surrounding areas, take a look at Cloudscene’s Bay Area market page or use our tool to compare the Bay Area to other markets.

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