Sentinel Data Centers announced today it has pre-leased 25 percent of its 100,000 square foot, 10 megawatt Phase II expansion at its Durham data center in North Carolina.
The announcement continues a trend in which tenants have been pre-leasing large volumes of data center space, embracing a build-to-suit data center approach that reduces the risk to developers of bringing new capacity to market.
Sentinel says its success with its Durham data center, known as NC-1, validates its belief that North Carolina can develop into a hot market for wholesale data center suites, competing with Northern Virginia for customers seeking data center space on the East Coast.
“Pre-leasing a quarter of our Phase II expansion speaks to the market’s appreciation for highest quality, ultra-flexible solutions coupled with a TCO profile among the best nationally,” says Todd Aaron, Co-CEO of Sentinel Data Centers.
In January, Sentinel Data Centers qualified for North Carolina’s Data Center Infrastructure Act, which provides tenants with sales tax exemptions on IT and data center equipment, as well as on electricity. The new legislation lowered the threshold for tax incentives from $250 million in investment to $75 million, and opened the benefits to multi-tenant data centers as well as single-tenant facilities.
“Complete sales tax exemption on our users’ IT infrastructure, along with power rates approximating 4 cents per kWh, materially impacts all-in occupancy economics, and our users are benefitting from this,” said Aaron.
Evolution of the NC Market
The Research Triangle Park area of North Carolina has long been an active market for technology firms. Renowned for its nexus of universities – including Duke, North Carolina and N.C. State – the area is also home to a thriving technology economy, including major data centers for IBM, Cisco, EMC and NetApp. The multi-tenant market in Research Triangle has historically been dominated by regional colocation providers like Peak 10, Data Chambers and Hosted Solutions (now part of Tierpoint), operating modest-sized facilities in the range of 15,000 to 50,000 square feet.
North Carolina boosted its data center profile between 2007 and 2010, as aggressive economic incentives helped the state win huge projects from Google, Apple and Facebook. The three tech titans set up shop in the area west of Charlotte, taking advantage of cheap power and land, and lots of it.
Wholesale data center providers saw an opportunity in North Carolina, believing the state’s attractive economics would lure customers with larger space requirements. In 2012 both Compass Datacenters and Sentinel announced plans to build multi-tenant data centers near Durham, hoping to build business in the Research Triangle tech corridor.
Flexibility as a Design Principle
“North Carolina continues to be one of the more dynamic data center markets on the East Coast,” said Kelly Morgan, VP of Services at 451 Research. “Sentinel’s expansion and pre-leasing is a clear indicator of the growing demand for the state’s competitive tax incentives, power rates and total cost of ownership.”
Construction of the Phase II expansion of Sentinel’s Durham data center began this past spring, as the facility’s 120,000 square foot Phase I neared capacity.
Sentinel has been among the providers that have begun to offer a variety of levels of power redundancy in its data center leases. The company says its Phase II design will continue this practice, using modular building blocks to enable customization of power densities and resiliency levels on a granular basis within each customer’s dedicated suite.
Sentinel is one of the industry’s most experienced data center developers. Founded in 2001, the company has developed more than 1.6 million square feet of data center facilities.