San Francisco Bay Area Data Center Market

Bay Area Sub-Markets

The San Francisco Bay Area is also known as Bay Area or SFBA. The Bay Area includes three (3) submarkets.

• San Francisco
• East Bay, which includes the area East of the Bay including, Oakland
• South Bay (aka Silicon Valley) includes the Peninsula and South Bay. Major South Bay cities are San Jose, Palo Alto, Santa Clara. The greatest concentration of data centers is in the South Bay.

Hazardous Risk Profile:

There is an ever present risk of Earthquakes through out the Bay Area. Although seismic risk remains constant, many of the Silicon Valley tech companies have chosen to colocate near their headquarters.

Data center providers have invested capital to mitigate the risk to their buildings if major earthquake occurred, however, a major earthquake can make it difficult to reach the data center. Additionally, power feeds and fiber cuts happen, leaving the data center isolated.

Tax Incentives:

The State of California does not provide tax abatement incentives for data centers. However local municipalities do offer incentives. For example, there is no city user tax in the City of Santa Clara, which is worth a 5% savings.

Electric Utility:

The Bay Area Industrial Power rates average between 9 and 16 cents per kWh. A shining star in the market is Santa Clara. The city has created a building boom for data centers with its low power rates.

Silicon Valley Power, a not-for-profit municipal electric utility, provides industrial electricity at rates 20 to 40% lower than the Pacific Gas and Electric (PG&E) service areas. Silicon Valley Power is owned and operated by the City of Santa Clara.

Silicon Valley's Network Connectivity

The Silicon Valley metro area enjoys good network connectivity due to the number of Internet Exchange Points (IXPs) and Interconnection Hubs. Equinix runs the two largest IXPs, First and since its founding,

Equinix has run the Equinix Exchange which extends to many of the Equinix sites in the metro. Second, the PAIX, which is the Palo Alto Internet Exchange. The PAIX has a long history which started in the 529 Bryant Street Building. It was a competitor to Equinix Exchange until Equinix acquired Switch and Data in 2010. The SFBA is fortunate to also have non-profit exchanges in the Bay Area. The non-profit IXPs SFMIX and AMS-IX BA are smaller but provide healthy competition.

The following buildings have the best connectivity (ranked by number of networks)

• Equinix San Jose campus (SV1, SV2, SV10)
• Equinix Palo Alto (SV8)
• CoreSite San Jose (SV1)
• 200 Paul (Digital Realty)

San Jose-San Francisco-Oakland CSA Demographics

The Bay Area MSA has a population of over 8.8 million people. The CSA stretches from Wine Country in the North to Silicon Valley in the South and counties near Oakland to the East. (Source: Wikipedia

Colocation Providers with more than 1 Site:

• Equinix
• Internap
• Digital Realty (via Telx data center acquisition)
• CoreSite has a large multi-building campus in Santa Clara, plus 55 S Market in San Jose and Milpitas.
• CenturyLink (via Level3) have multiple sites that offer retail data center space.

Single Site SFBA Colocation Providers

• EdgeconneX, H5, and Hurricane Electric, and vXchnge have a single data center in the region.

Wholesale Data Center Providers

Despite the higher electrical utility costs, there are many wholesale data center providers in the Bay Area.

• Digital Realty: After swallowing up Dupont Fabros (DFT) and Telx, Digital is the largest wholesale data center provider in the SFBA.
• Vantage Data Centers is building their 2nd campus in Santa Clara
• CoreSite's Santa Clara campus continues to expand