Vantage Data Centers begins construction of several phases in Quincy

Having emerged over the last year as one of the most aggressive data center developers in Silicon Valley, Vantage Data Centers, backed by technology-focused private equity firm Silver Lake Partners, has now set its sights on expanding into other prominent data center markets around the U.S.

Santa Clara, CA-based Vantage announced plans to purchase 63 acres in central Washington state for the development of nearly 500,000 square feet of enterprise data center space. The new campus will extend the company’s reach to Quincy, a relatively remote town more than 150 miles east of the Puget Sound, where Dell, Microsoft and Yahoo already maintain or are gearing up for new server farms.

Vantage will build out the project in several phases, starting with a 6 megawatt, one-story 133,000-square-foot center that has been fully leased to an undisclosed Fortune 100 technology company. Groundbreaking for the first phase began Oct. 15 with completion slated for August 2012.

Future phases of the Washington campus will include a 105,000-square-foot Enterprise Technology Center and capacity for an additional 235,000 square feet of data center space. The enterprise technology center will combine corporate office and data center space, with the office space housing up to 100 employees in executive offices, conference rooms and meeting areas.

The Quincy project, which follows the full lease up of available space at Vantage’s V2 campus in Santa Clara, CA, is the developer’s second campus after Santa Clara, where it is completing work on its third building and plans to begin bringing modules on line ahead of schedule before the end of the year.

Vantage selected Quincy as its second location primarily because of Grant County’s ample supply of hydroelectric power available from the Columbia River. In doing so, the company is tapping into a market described by some analysts as the most attractive for investors in all of commercial real estate at the moment.

With demand showing no signs of slowing, the U.S. data center market is expected to continue its aggressive growth rate as providers and users of data center space begin to benefit from thawing capital markets, resulting in higher deal volume following years of pent-up demand, according to Jones Lang LaSalle’s mid-2011 U.S. Data Center overview released this week.

Data center owners, developers and operators are expected to fund more so-called “white-floor” computer room space as capital flows into the market and data center users seek to take advantage of technological advances in blade servers, cloud offerings and virtual software solutions, JLL said — which happens to be the market that Vantage is aiming for.

Vantage hopes to differentiate itself from what Vice President of Marketing Greg Ness calls the traditional “one design fits all” approach to data center development as it competes in a field dominated by large publicly traded companies such as DuPont Fabros Technology Inc. (NYSE: DFT), CoreSite Realty Corp. (NYSE: COR) and Digital Realty Trust (NYSE: DLR). The company is looking for opportunities in all the top tier data center markets and some secondary markets, he said.

Vantage’s strategy has been to provide wholesale data center space that can easily be custom designed to meet clients’ specific data needs, with the company’s design engineers collaborating deeply with its customers’ engineering departments in developing the facilities.

As a developer of wholesale data centers, as opposed to colocation centers, Vantage leases buildings and space to companies that have their own IT teams and infrastructure, an approach that reduces operating costs and investment risks, Ness said.

In effect, Vantage outsources the physical building rather than the people and equipment, enabling it to leverage the expertise of people with experience building a lot of data center space. The user avoids tying up capital and generally gets a much more energy efficient, better-aligned data center than the customer could build itself, Ness said.

“Energy will continue to be one of the biggest market drivers. As power consumption in data centers continues to increase, users are increasingly concerned with power redundancy, capacity and cost,” according to Bo Bond, co-lead of Jones Lang LaSalle’s Data Center Solutions team.

While the “first-generation” wholesale space providers have been successful, an explosion of new devices connecting to networks with virtualization and cloud-type computing environments has resulted in more fluid conditions for IT departments, Ness claims.

“This has increased power and cooling requirements and driven enterprises to want to have more say over electrical, mechanical designs and features and other building attributes,” he said. “The standard buildings don’t align well if you view IT as strategic to your business.

“If you have certain types of applications and growth requirements, a one-design-fits-all architecture for your data center may not be satisfactory. As a matter of fact, it could be much more expensive in those types of building to get a space that’s customized to your type of environment. Data centers need to be tightly aligned with both the IT team and the CFO’s and COO’s priorities.”

“Jim Trout’s vision is that if we can build data centers in collaboration with the enterprise and give them exactly what they want and provide expertise, we can disrupt the category and create the wholesale data center company of the future,” Ness said.

Trout put the theory to the test in Santa Clara, one of the most competitive data center markets in the world. With backing from Silver Lake Partners, privately owned Vantage in 2010 acquired the 18-acre site in Santa Clara formerly owned by Intel Corp.

“For (Trout) to come in here and start taking deals right and left from these large public companies in the first 12 months of existence, it validates his vision that it’s time for the wholesale data center players to step up and customize their offerings to the needs of their clients, versus just giving them what space is available,” Ness said.

Industry talk about the deals and market share Vantage has won over established players has raised the company’s profile over the last year, in particular the lease up of the vertically scalable V2 facility in Santa Clara, taken by a single tenant in what is likely the largest lease of a wholesale data center in the history of the industry.

Vantage’s recent wins include lease signings by leaders in social networking, e-commerce, online gaming, cloud services and storage, web browsing and video game development. As a result, Vantage’s Santa Clara Campus is already 100% leased in its first two buildings, the 6-MW V3 facility which came online in January and is fully leased to four companies, and the 9-MW V2, which is occupied.

Sales will start soon for V1, the third Santa Clara data center building with 10MW and an additional 90,000 square feet of powered shell space coming online over the next two quarters.

“While the demand environment in Silicon Valley is clearly robust, this market is also one of the world’s most competitive,” Trout said. “We chose to launch Vantage in such an environment to prove that we could excel in a highly competitive marketplace with established players that have lost touch with critical innovations and enterprise requirements.

After having initial success in Silicon Valley, Vantage is confident it can bring the approach to virtually any data center market, Trout said.