Focus on

Data Center
Construction

Fortresses

in the Cloud
Data centers expand in region

Inside:
n Data center deals, openings
on the rise
Page S-2

n Data centers built to

withstand bad storms,
bad actors
Page S-4

n Three trends driving growth

in data centers
Page S-6
Supplement to
Finance & Commerce
August 20, 2015
www.finance-commerce.com

S-2 Finance & Commerce

Focus on Data Center Construction

Thursday | August 20, 2015

Fortresses in the Cloud

FILE PHOTO: BILL KLOTZ

The former American Express data center, at 1001 Third Ave. S. in downtown Minneapolis, was sold in January for $22.4 million to Dallas-based DCI Technology Holdings.

Data center deals, openings on the rise

BY FRANK JOSSI
Special to Finance & Commerce

Data centers continue to expand and

attract the interest of customers looking
to use the cloud for transactions and
storage.
Colliers International senior associate
Dan Peterson said so far this year the
data center market has seen openings,
expansions and sales of data centers,
which he outlined in a recent report.
The Twin Cities has been a very active
market lately with a lot of absorption of
existing inventory. said Peterson, who
works in the firms Minnetonka office.
The biggest deal of the year involved
Colliers. The former American Express
data center, at 1001 Third Ave. S. in
downtown Minneapolis, was sold in
January for $22.4 million to Dallasbased DCI Technology Holdings, which
also owns Tritech Center at 331 Second
Ave. S.
Built in 1988, the former American
Express centers newest incarnation will
be as a multi-tenant data center. DCI is
spending $20 million on a renovation
of the 467,000-square-foot space to
accommodate multiple users, he said.
The seller was Atlanta-based KAN AM
1001 3rd Avenue South LP.

Also in downtown, Cologix opened the

first phase in March of a 28,000-squarefoot data center at the 511 Building or
Minnesota Technology Center at 511
First Ave. Dubbed MIN3, the facility
is in the same building as the Minnesota
Internet Cooperative Exchange, a shared
data center.
Denver-based Cologixs investment
should come as little surprise, said
Peterson. In the past the local data

We are on the radar

as an emerging market
with national providers
swooping in and
creating that buzz.
Dan Peterson, Colliers International

market was largely focused on local

providers but that has changed as
the Twin Cities has gained a national
reputation as a player.
Were still a pretty hot market
nationally. We are on the radar as an
emerging market with national providers
swooping in and creating that buzz, he

said. Were getting a lot of attention

from the national perspective.
Suburban data centers
The action is not only downtown. In
fact, most of it is in the western suburbs,
where communities with undeveloped
land offer sites for new centers and
warehouses available for repurposing as
data hubs. Chaska is a good case in point,
with two recently opened data centers.
Denver-based ViaWest opened a
45,000-square-foot, raised floor data
center space in a 158,000-square-foot
building at 3150 Lyman Drive. Another
35,000 square feet will be added once the
initial space has been leased. Dan Curry,
regional director of sales for ViaWest,
said leasing is definitely up from where
it was six months ago.
It has taken a bit of time for the
local market to grow comfortable with
using third-party data centers, he said,
but today many small and mediumsize businesses have begun to see the
advantage of that arrangement. Those
companies are drawn by the layers of
security a good data center provides,
he added.
Brett Severson, vice president of
Jones Lang LaSalles Minneapolis office,
worked with ViaWest and Stream Data

Center, which built a new 75,000-squarefoot facility at 1708 West Creek Lane
in Chaska. That building will operate
as three separate data centers under
one roof, he said. Two of the three
10,000-square-foot centers are complete,
with the third under construction.
One client has leased the entire first
data center. The others can be leased
to one or several clients, Severson said.
Each of the three pods operates as a
separate data system, he added. Its
a different model than the other data
centers.
That both data centers are in Chaska
is not surprising. The city has abundant
fiber, a municipally owned utility that
offers appealing electric rates, and plenty
of parcels attractive to developers of
data centers, Severson said.
Theres this assumption that data
centers dont pay taxes or create jobs
but thats not true, he said. They offer
great, high-paying jobs and they dont
have a big impact they dont create
truck traffic or anything like that.
Another project Severson worked on
was DataBank in Eagan, a 90,000-squarefoot former bakery on which Dallas-based
DataBank Holdings Ltd. is spending
DEALS to page 3

Thursday | August 20, 2015

Focus on Data Center Construction

Finance & Commerce

S-3

Fortresses in the Cloud

Deals
Continued from page 2

$48 million to turn into a data center.

DataBank recently opened 10,000
square feet of the space to companies
and around 35 percent of it is leased,
Severson said.
The other large data center to open
is CenturyLinks 100,000-square-foot
facility, known as MP2, in Shakopee. Its
one of the first Tier III multitenant
data centers to open in the Twin Cities,
the highest designation given by the
Uptime Institute, an independent,
advisory organization.

FILE PHOTO: BILL KLOTZ

The lobby of the former American Express data center looks like it belongs in
any office tower in downtown Minneapolis. New owner DCI Technology Holdings
will spend $20 million on a renovation of the 467,000-square-foot space to
accommodate multiple users.

Central location is a plus

Fueling the growth is the Twin Cities
strong Fortune 500 presence, a skilled
workforce and industries that tend to
be data-intensive from health care
to retail, Peterson said. The regions
central location and relatively low cost
of power is part of the equation, he
said. Thats a much more significant
issue in other markets.

Another attraction has been the states

aggressive role in pursuing data center
companies with generous tax breaks,
Severson said. Those include sales tax
and property tax exemptions for data
centers.You cant underestimate the
value of those tax benefits in bringing
data centers in, he said.
Not everyone is convinced the market
needs more data centers. Jim Wolford,
CEO of Minneapolis-based Atomic Data
LLC, owns one data center and leases
space in two others.
Im flabbergasted because I dont
see the business. Computers are getting
smaller; computing is going to the
cloud, he said. Even Fortune 500s are
coming to me for managed infrastructure
and cloud because their footprint is
shrinking.
Co-location sites do not need that
much space, despite the growth of the
cloud, he said. The market is overprovisioned, he said. Or, Wolford
conceded, maybe Minnesotas relatively
safe location away from the coasts
and from severe weather makes it a
wonderful place for data centers.
Time will tell.

S-4 Finance & Commerce

Focus on Data Center Construction

Thursday | August 20, 2015

Fortresses in the Cloud

FILE PHOTO: BILL KLOTZ

The Atomic Data facility sits in a basement vault with 4-foot to 8-foot-thick walls, which was once used by the Federal Reserve Bank of Minneapolis. After the bank moved,
the building was renamed Marquette Plaza.

Data centers built to withstand

bad storms, bad actors
BY FRANK JOSSI
Special to Finance & Commerce

Data centers are built to last.

Intentionally bland, they must withstand
the worst nature has to offer -- from
tornados and fast winds to torrential
rainfall and hurricanes.
Their exteriors function as a
technology fortress, with cameras,
controlled entry points and plenty of
security. They have some intriguing
differences from other structures
because of their exceptional security
and electrical needs.
Those attributes come with a high
price. Data centers cost from $500 to
$1,200 per square foot to build compared
to an average of $150 to $200 per square
foot for office space, said Scott Ganske,
Golden Valley-based M.A. Mortenson
Constructions director of missioncritical operations.
The large price differential is based
on the resiliency and reliability of the
structure, he said, noting not all data
centers are created alike. Considering
the centers protect a companys key
asset data -- the cost does not seem
unreasonable, Ganske said.
From the street, data centers often

Usually these projects

are Big M, mechanical;
Big E, electrical;
small a, architecture.
We like boring.
Tim Kittila, Parallel Technologies Inc.

look as bland as a brick box. Eden

Prairie-based Parallel Technologies Inc.,
which designs and builds data centers,
has no architects on staff.
Usually these projects are Big M,
mechanical; Big E, electrical; small a,
architecture, he said. We like boring.
Data center design
Still, new data centers in the suburbs
have at least a touch of style, usually at
the entrance. The buildings cant have
any windows, at least none in the rooms
where the servers are located. But the
lobby areas can have a few windows.
In a greenfield setting you probably
dont want it too boring, said Kittila,
who is director of mechanical and

electrical infrastructure division.

The shell of a data center must
generally withstand winds of at least
150 mph, which requires walls as thick
as 14 inches. Parapet roofs are installed
so the roof is not exposed for that major
wind shear, he said. Those roofs are
generally tough enough to withstand
winds of 185 mph.
Ceilings have a vapor barrier with
a double membrane to avoid frozen
condensation in the winter months,
Kittila said. The high humidity
environments of data centers, created
by powering so much equipment, are
at odds with freezing temperatures.
Condensation can occur and freeze to
the ceiling, bringing internal rainfall in
spring without proper insulation, he said.
The configuration of data centers is
different from an office building. The
mechanical and electrical equipment
can take up to 25 percent of the space,
although that can be reduced by placing
some of it outside. Usually only a small
office is required, as well as a staging
area for moving servers in and out of the
building, he said.
You want to keep people out of the data
DESIGN to page 5

Thursday | August 20, 2015

Focus on Data Center Construction

Finance & Commerce

S-5

Fortresses in the Cloud

FILE PHOTO: BILL KLOTZ

Above: Jim Wolford, left, CEO and

owner of Atomic Data, and Blake Talley,
director of the companys Network
Operations Center, leased 15,000
square feet in the former Federal
Reserve Bank of Minneapolis building.
Left: Data centers require a lot of
energy for heating, cooling and keeping
servers on 24/7. DataBanks new
90,000-squarefoot center in Eagan
has water tanks (at left) for the rooftop
cooling units and back-up generators (at
right) for use during power outages.

STAFF PHOTO: BILL KLOTZ

Design
Continued from page 4

The Marquette Plaza, at 250 Nicollet

center so youll usually have a separate
office space onsite, Kittila said. You also Mall in downtown Minneapolis, earned
need that staging area to unbox or uncrate t h e h i gh e s t L E E D ( L e ad e rs h i p i n
servers, network equipment and racks. Energy and Environmental Design)
Data centers have one of two types of certification from the Washington,
floors -- a slab-on-concrete or the more D.C.-based U.S. Green Building Council.
popular raised floor. In a raised floor The data center sits in a vault once
design, a false floor sits 1 to 3 feet above a used by the Federal Reserve Bank
concrete slab. In general the raised floor of Minneapolis with 4-foot to 8-footfeeds mechanical air to the servers through thick walls to protect the operation,
perforated tiles, he said.
Talley said.
Some data centers place electrical and
Still, Atomic Data has spent a sevennetwork cables below the raised
figure sum to update the data
floor, thought that approach is
center. Most of the money is
not as popular as it once was, said
being spent on new electrical
Kittila. Generally the raised floor
and network equipment as well
is used to transfer air for cooling,
as monitors that provide hourMinimum
a plenum for air, he added.
by-hour electric and cooling
construction
In terms of geography, data
water consumption data. Being
price per
centers are best located in areas
in the basement helps maintain
square foot for
with little chance of flooding
a certain temperature much
data centers
and good Internet and electrical
more easily than an above ground
Source:
connectivity. Most of them
data center, he said.
Mortenson
actually address the electricity
With so much competition
Construction
they can provide onsite in
not only locally but also from
marketing materials. A brochure
huge players such as Amazon
for Stream Data Center in Chaska points and Microsoft -- which have significant
to three rooms available for lease with co-location centers around the country
1,200 kilowatts of electricity feeding each -- the one thing Talley can control is the
one of them.
cost of managing his center.
If the electrical goes down, the centers
T h e p r i c e o f d a t a s t o ra ge a n d
have sophisticated backup generators operations is so low that margins have
capable of providing 24 to 72 hours of plummeted. Talley knows in the end
power before having to be refueled, Kittila that efficiency leads to a lower carbon
said.
impact, even if its not an attribute
every client considers important. Many
Environmental approach
clients simply want a low price, and he
Data centers, by nature, require a lot achieves that through energy efficiency.
of energy for heating, cooling and keeping
I have incredibly sophisticated
servers on 24/7. What attracted Atomic heating, cooling and electric systems
Data LLC to lease a 15,000-square-foot data that allow me to maintain an efficient
center space last year in Marquette Plaza data center like Ive never ever had
was the built-in advantage of a sustainable before, Talley said. When I talk
building and basement location with plenty dollars and cents to CEOs about how
of free cooling, said Blake Talley, Atomics well we manage the center, I win the
director of network operations.
green conversation every day of the week.

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S-6 Finance & Commerce

Thursday | August 20, 2015

Focus on Data Center Construction

Fortresses in the Cloud

Dallas-based DataBank chose Eagan for
a 90,000-square-foot data center, after
considering a number of other areas of
the country. DataBank was attracted by
property tax incentives and fast-track
permitting.

FILE PHOTO: BILL KLOTZ

Three trends drive data center growth

BY ELIZABETH MILLARD
Special to Finance & Commerce

Data center construction virtually

stopped during the recession, with banks
hesitant to lend large sums for speculative
projects, says Jason Baker, co-founder of
Eden Prairie-based Internet service provider and data center VISI, and now software development staff engineer at Dell
Cloud Manager.
Now that the economy has recovered,
money is pouring back into the data center industry, he said. Providers are responding to the pent-up demand.
Nationally, this catch-up construction is driving a number of trends, from
cloud migration to larger facilities, and
the Twin Cities is poised to capitalize on
that growth.
The metro area has all the ingredients
that go into the recipe for an ideal data
center low risk of earthquakes (and
no hurricanes), a strong business climate
with a mix of small and large companies,
cost-competitive energy sources, a robust
fiber optic network and a cooler climate
that reduces air-conditioning expenses.
As a result, the Twin Cities is likely to
be a strong choice for data center expansion and has already attracted some major players in the market.
Here are three trends that are driving
growth, nationally and locally.
Data centers go big
Only a decade ago, data centers that
were considered large usually covered
about 30,000 square feet. When VISI was
built in 2010, it seemed expansive at 40,000
square feet, but Baker said that would be
a smaller facility today.

We are truly in the

midst of an arms
race.
Jason Baker, co-founder of VISI

FILE PHOTO: BILL KLOTZ

A Mortenson construction crew works on a UnitedHealth Group data center in

Chaska in this 2011 photo.

Many that are under construction or

built within the past few years are double the size of VISI or larger.
Nationally, cloud providers like Amazon, Microsoft and Google are building
centers that dwarf existing facilities, but
theyre not the only ones thinking big.
Technology company CyrusOne is building a 57-acre campus in Chandler, Arizona,
that will represent nearly 1 million square
feet of space.
We are truly in the midst of an arms
race, said Baker.
Locally, that trend is playing out in several projects. ViaWest in Chaska broke
ground only last year and is already offer-

ing 70,000 square feet of data center space.

DataBank in Eagan offers a 90,000-squarefoot building, and CenturyLink opened for
business last year in Shakopee, with a 10acre site that has 50,000 square feet of operational data center space.
Providers are getting larger as well, Baker said. Weve seen quite a bit of consolidation in the data center industry over the
past five years, he said. Most of the large
telcos have done acquisitions. Small data
center providers will not be able to compete in the long run. Its entirely possible
that we will only have a handful of major
U.S. data center providers in 20 years.

Migration to the cloud

On overriding trend thats driving data
center growth is the rapid movement of
businesses to a cloud model, says Graeme
Thickins, a technology startup marketing consultant who serves on the board
of MinneAnalytics.org, an event organization for the regions data professionals.
Research firm IDG reported that 69 percent of businesses are already using cloud
technology and an additional 18 percent
plan to implement it in the near future.
Moving to the cloud lowers initial capital expenses for companies, as theres no
heavy investment in servers, said Thickins. For established businesses, the
cloud is providing an attractive option
when server or storage capacity needs
to be increased.
But cloud adoption is not an all-ornothing proposition, he added. Some
companies are using a hybrid model that
involves using cloud resources when necessary, without eliminating in-house data
storage systems.
With the abundance of data center
projects coming into the Twin Cities,
Thickins thinks local businesses will
be able to innovate more easily. With
TRENDS to page 7

Thursday | August 20, 2015

Focus on Data Center Construction

Finance & Commerce

S-7

Fortresses in the Cloud

Trends
Continued from page 6

increased cloud usage, the IT department

is becoming more strategic to the
business, he said.
Municipal and state support
Construction projects like data centers
require more than local builders who are
familiar with data center specifics they
require numerous conversations with state
and city authorities, who can sweeten the
deal for providers.
Although job creation numbers are
lower than they would
be for other types of
businesses, data centers offer a ripple efPERCENT
fect that makes them
Share of
appealing for municibusinesses
palities.
using cloud
Cities are rolling
technology
out
the red carpet to
Source: IDG
data center providers,
said Baker. While
data center providers dont necessarily employ a significant
number of people, they support the tech-

69

FILE PHOTO: BILL KLOTZ

Data centers are getting much bigger. In 2012 M.A. Mortenson completed a 220,000-square-foot data center in Chaska for
UnitedHealth Group, the health care giant based in Minnetonka.

nology operations of the surrounding industries, helping to retain other businesses in the region.
As a result, municipalities offe r

providers tax incentives, land and

utility upgrades, and offer publicprivate partnerships, he added.
A s a l o c a l ex a m p l e, Da l l a s - b a s e d

DataBank chose Eagan for a

90,000-square-foot data center, after
SUPPORT to page 8

S-8 Finance & Commerce

Thursday | August 20, 2015

Focus on Data Center Construction

Fortresses in the Cloud

Support
Continued from page 7

considering a number of other areas of

the country, said Kris Edinger, general
manager for the Minneapolis office.
Working with GreaterMSP, the state
and Eagan, DataBank was attracted by
property tax incentives and fast-track
permitting. We felt very supported in

our expansion to the Twin Cities area,

she said. We saw many advantages to
building here. The state and the municipality just confirmed that decision.
In general, look for similar expansion
efforts to take place locally. With a better economy and increased demand, data

center providers are taking advantage

of tax incentives and technology innovations to expand. Nationally, this could
result in higher data-center traffic and
a boom in construction, and the Twin
Cities is likely to be on the forefront of
the trends.

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