“Buy land, they’re not making it anymore”
— Mark Twain
Many things have been referred to as the gift that keeps on giving, but Twain had it right. Perhaps the only investment that you can make that is virtually guaranteed not to depreciate is land. Unfortunately, for most prospective data center customers, the value of the land that a facility is built on doesn’t factor into the decision making process since multi-tenant facilities (MTDC) have historically been their only option unless they elected to build the facility themselves. This is no longer the case.
Through the ability of a customer to locate a hardened Tier III certified, LEED Gold compliant facility wherever they need it with a Compass standalone data center, the concept of the option value of the land the facility sits on becomes a key factor in their overall control of their current facility and future growth. For example, a customer purchases land for their new 20,000 square foot facility and to support up to 80,000 square feet of additional expansion. The land itself becomes an appreciable asset for them. It also provides them with a variety of options in terms of their future data center planning.
By owning the land the customer now has a greater degree of control over their data center expansion. Unlike MTDC alternatives in which the customer must prelease, and pay for, unused space to ensure its availability, the need to expand their facility is tied directly to their own requirements and revenues. In short, they can expand on their own schedule while the land that will support this added capacity continues to appreciate.
Time to market is also mitigated as a factor under this new structure. By owning the land itself, the 3-6 months process normally associated with site selection, acquisition and permitting is eliminated. Construction of a Compass expansion POD can begin whenever the customer is ready and be completed in within five (5) months. Thus the customer is able to grow their facility to meet new demand on their schedule, where they geographically need it, as opposed to having to either pre-pay for capacity or having to obtain new space in another remote location as would be the case under the prevailing MTDC model.
This option value also extends to instances wherein the customer chooses not to add new data center capacity with Compass. If technology were to change to something that only another provider could deliver, the land to build it on is already there. Even if they elected to never build another data center, as previously stated, the remaining land continues to increase in value and may be sold by the customer or repurposed for some other corporate use.
The current real estate centric business models used by many of today’s wholesale data center providers are at odds with the changing needs of the customer base they are targeting. The MTDC model restricts customers’ control over their geographic requirements, data center operations and options for future growth. At Compass we believe that a customer centric business model that puts control back into the hands of the customer by offering them choices and economically advantageous alternatives like option value better reflects the needs of an evolving marketplace.