It’s been the big question in the greater New York data center market: Who will buy one of the region’s largest facilities?
There should be an answer this summer. DuPont Fabros Technology said there has been strong interest in its New Jersey data center in Piscataway, N.J. and a sale could be completed in the third quarter, which runs from July through September.
“The level of interest in this property remains quite strong,” said Christopher Eldredge, the CEO of DuPont Fabros Technology (DFT). “The process is going great. We have now progressed through multiple rounds of bidding. There were a large number of interested parties, and we have several strong bidders.
“It’s not unrealistic to assume a third quarter 2016 closing,” said Eldredge, who spoke with analysts on the company’s quarterly earnings call.
Who Are The Bidders?
DFT placed the 360,000 square foot NJ1 facility for sale in January, saying its location is better suited for retail colocation than wholesale data center space. DuPont Fabros says it plans to use the proceeds from the sale to support its expansion in several promising new markets, including Toronto and Portland, Oregon.
The first phase of NJ1 opened in 2010 with 18.2 megawatts of capacity. DFT has leased about 70 percent of the footprint and 52 percent of the power capacity of phase I. The shell for a second 18-megawatt phase has been completed, presenting an opportunity for a company seeking a large chunk of ready-to-build space in a key market.
“We’ve seen a lot of diverse types of potential buyers,” said Eldredge. “It’s publicly traded data center providers, privately held data center providers, and there was a document management company. We’re very pleased with the progress and we’re expecting a positive outcome.”
The New Jersey Data Center Market
New Jersey is one of the most active data center markets in the country, boosted by its proximity to Wall Street and the state’s robust supply of healthcare firms and enterprise users. The New Jersey market has traditionally focused on colocation facilities and single-tenant data centers in several northern counties adjacent to Manhattan. In recent years that has expanded to include a growing market for wholesale data center space in central New Jersey.[clickToTweet tweet=”DuPont Fabros: Bidders for NJ1 include both publicly traded and privately held data center providers.” quote=”DuPont Fabros: Bidders for NJ1 include both publicly traded and privately held data center providers.”]
At more than 1,100 feet in length, the NJ1 data center is about the length of a Nimitz class aircraft carrier. It came online at a time when there were concerns about overbuilding in the New York/New Jersey market. DFT’s Piscataway facility represented the largest chunk of supply in an intensely competitive market. In addition to the colocation providers in North Jersey, NJ1 also faced competition from two wholesale providers in Central Jersey, Digital Realty and Sentinel Data Centers.
NJ1 has leased up over time, but at a slower rate than DuPont Fabros has experienced with its facilities in other major markets, including Northern Virginia, Silicon Valley and suburban Chicago. Eldredge says that is due to the enterprise-centric nature of the New Jersey market, and not the quality of the facility.
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“When you take a look at the building, it is a tremendous asset,” he said.
Looking to New Markets
In the earnings call, Eldredge said DFT has purchased land in Portland and hopes to commence construction later this year. The company is still scouting sites in the Toronto market, and hopes to acquire land soon.
“We don’t have a pre-lease in those new markets, but there’s been a tremendous amount of interest in those two markets from both our existing customers and potential new customers,” said Eldredge. “That’s why we’re very bullish on Toronto and Portland.”
DuPont Fabros was also considering Phoenix as a potential expansion market, but is not pursing any new construction there.
“At this time we’re putting Phoenix on hold, so we’re not going out purchasing land in Phoenix,” said Eldredge. “We’re going to continue to monitor that market, but we do feel there is some level of risk to oversupply in that market.”