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No Red Flags, Nothing But Blue Sky In Atl Cloud/ Data Center ArenaBased on the interview with Frank Clementi, Managing Director, Newmark Knight Frank

1. WHAT ARE CLIENTS CALLING YOU ABOUT THESE DAYS? HOW DO THEY FEEL ABOUT THE ATLANTA MARKET?

Our clients are bullish on the Atlanta data center market. They are interested in colo space, available DC’s to purchase and/or sell, buildings to convert to DC’s and available land to build DC’s upon. The Atlanta data center market is getting world-wide attention for many reasons. Chief among these are:

• Reliable and low-cost power ($04 – .05/kWh)

• Low risk of natural disasters (highest elevated city east of the Mississippi)

• Dense fiber networks (top 5 U.S. market for bandwidth access)

• Key U.S. transportation hub (World’s busiest airport)

• “Transaction Alley” processes 70% of all electronic payments

• 3rd largest concentration of Fortune 500 companies (15)

• The passing of HB696

2. WHAT KIND OF DEMAND DRIVERS ARE SETTING THE PACE IN ATLANTA?

Demand for data center space in metro Atlanta is driven by cloud users, as well as gaming, IoT, technology, healthcare, media and content.

3. HOW IS THE EDGE COMING INTO PLAY IN ATLANTA OR THE SOUTHEAST?

Atlanta is among the top 5 United States markets for total bandwidth and fiber access. The City of Atlanta is investing in initiatives to become an efficient and sustainable “smart city,” with plans that include a Smart City Command Center at Georgia Tech’s High Performance Computing Center and a partnership with Google Fiber for advanced traffic control and monitoring. Fiber-to-the- Tower (FTT) initiated connections to +500 towers in 2015. AT&T announced Atlanta would be among first cities to get advanced 5G wireless service.

4. HOW DOES THE ATLANTA DATA CENTER ARENA COMPARE TO THE OTHER MAJOR MARKETS SUCH AS PHOENIX, DALLAS, OR NORTHERN VIRGINIA? WHAT MAKES IT UNIQUE AT THIS POINT IN TIME?

Atlanta compares very favorably with other major markets. Relatively smaller than Pheonix, Dallas or Northern Virginia, in terms of total megawatts, but Atlanta’s data center market is growing fast because of HB696, reliable and low-cost power, dense fiber networks, low risk of natural disasters and large clusters of IT workers.

5. HOW IS ATLANTA OR THE STATE OF GEORGIA SUPPORTING THE DATA CENTER INDUSTRY?

The state is doing a great job supporting the data center industry. For example, last year House Bill 696 was voted through Georgia’s House and Senate. This package will allow sales and use tax exemptions on equipment and software for high-technology data centers. Qualifying requirements include the creation of 20 new quality jobs and aggregate expenditures of $100, $150, or $250 million (depending on county population), over a 7-year period, to qualify for a 10-year tax abatement.

6. WHAT IS THE MOST IMPORTANT DRIVER OF ACTIVITY IN THE REGION AS WE LOOK TOWARD 2020?

There are three large campuses breaking ground in Atlanta by CyrusOne, Facebook and Switch. These new entrants to the market are joined by other newcomers including Ascent, DataBank, Green House Data, Lincoln Rackhouse, Mapletree and ServerFarm.

Atlanta’s business-friendly climate and low power costs, along with the anticipated incentives associated with the passing of House Bill 696, are expected to propel development. Several market participants expect Atlanta to become the second-largest data center market on the East Coast, second only to Northern Virginia.

There are still opportunities for operators to enter this Southeastern node. The Douglas County Economic Development Authority has identified 859 acres for future data center development. The parcels are located near established data centers operated by T5, Digital Realty, Google, AT&T and both of the highly-anticipated CyrusOne and Switch campuses.

7. WHERE ARE VACANCY RATES AND PRICING HEADED AS WE ENTER THE SECOND HALF OF 2019?

There remains a combined 500k sf of vacant data center space with more coming online in the 4th quarter of 2019 and demand doesn’t appear to be keeping pace, so naturally prices will continue to be competitive and be forced down, especially for colocation space.

8. ARE THERE ANY RED FLAGS ON THE HORIZON WHEN YOU TAKE A HIGH LEVEL LOOK AT THE ATLANTA DATA CENTER ARENA?

No red flags, nothing but blue sky!

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