Data Center Decisions: Building vs. Leasing Data Center Space

There are considerable advantages to both building and leasing data center space. Decision-makers must carefully weigh their options and the costs associated with each to select the strategy that is best for them.

In the current IT environment, there are a number of considerations that data center service providers must make. Among the most important is the decision to build a company-owned facility or lease wholesale space in another vendor's data center. There are significant benefits to both sides of this argument which can make it difficult to choose.

Building A Data Center: Top Advantages Of Owning A Facility
When companies build their own data centers, they have complete control over nearly every aspect – from the overall facility designs down to the granular operational details like temperature and asset access. Firms that develop and operate their own data center space can also build out their resources in a phased and/or modular approach to manage capital deployment. In addition, since the space belongs to the service provider, they can utilize their assets however they please, whether this means leveraging resources for their own IT equipment or leasing space to other companies for a profit.

Leasing Data Center Space: Top Benefits Of Colocation Services

"Leasing offers a more consistent and predictable cost model and can help providers reduce capital expenditures."

On the other hand, leasing from a top-tier provider has its advantages as well. This approach offers a more consistent and predictable cost model and can help providers reduce capital expenditures when compared with building and operating their own facility. Leasing data center space also provides increased flexibility, especially when it comes to resource and asset management. For instance, if a client finds that they need more space and computing power, it is relatively easy to scale up without needing to pay considerable build-out costs up front. As the data center owner provides the purchasing power, it makes it a much easier process for clients to access space and power and expand these resources as needed. What's more, the facility owner provides its own trained and experienced staff to operate the data center, meaning companies leasing space can rest easy knowing the infrastructure and facility are being properly maintained and managed. 

Additionally, recent data center research shows that many IT and computing giants are opting for a hybrid approach, where service footprints are split between owned and leased facility space. Despite owning their own data centers throughout the U.S and across the globe, big name service providers including Apple, Facebook and Microsoft have also been leasing space for many years and continue to keep much of the leased space in their data center portfolios.

Cost Considerations
A main factor that separates leasing and building data center space is the varied costs associated with each approach. When companies look to build their own facilities, there are a number of up-front expenditures to keep in mind, including:

  • Planning, design and commissioning spending
  • The price of purchasing land and building materials
  • Data center infrastructure and network connectivity costs
  • Security equipment expenditures
  • Staffing expenditures
  • Annual maintenance costs
  • Property taxes
  • The cost of soft services – i.e., landscaping, housekeeping, etc.

Leasing data center space can be a much more cost-efficient approach for those organizations that are capital constrained or simply prefer to invest the capital into their core business rather than a long-term fixed asset like a data center. For those that prefer to lease data center space, certain areas of the United States offer a more competitive cost environment in terms of lease fees, taxes, and the cost of power and connectivity. Researchers found that Atlanta, Colorado Springs, Northern Virginia, Portland and Seattle provide the most cost-effective data center options for companies looking to lease space.

Overall, there are considerable advantages to both building and leasing data center space. Decision-makers must carefully weigh their options and the costs associated with each to select the strategy that fits their strategic business direction.

Brought to you by WiredRE, the nation's leading cloud, colocation, and data center advisory firm.

There are different benefits and costs associated with building a data center and leasing wholesale data center space.