Sandy boosts interest in data center space, especially in Rockland County

Before Hurricane Sandy, signing an office lease meant considering cost, size, condition, landlord, maybe the neighborhood. Today, storm-wary tenants are asking another question, a powerful one, if you will: What electrical grid is the building on?

Sandy knocked out power to hundreds of businesses, costing them millions in downtime. Two of the hardest hit sectors: media and financial services, which both rely heavily on computers for their day-to-day operations.

Gawker Media, the Huffington Post and Buzzfeed.com, for example, were offline for days when the storm’s strong winds and torrential rains knocked out the servers at Datagram, at low-lying 33 Whitehall Street.

Datagram’s vulnerability to flooding has the companies, along with scores of other businesses, rethinking their data and disaster recovery center requirements, brokers told The Real Deal.

“Hurricane Sandy made everybody painfully aware of this problem,” said John Stoddard of Jones Lang LaSalle, who has represented tenants in large data center leases.

The choices are limited, though. Companies want a location close enough to New York City that employees can get there during an emergency but far enough away that it is on a different power grid.

One place that fills the bill is Rockland County, 15 miles northwest of Manhattan.

“The only time the electricity has been down here was during the blackout [of 2003],” said Tim Jones of Glorious Sun Robert Martin, owner of Blue Hill Plaza, a 1.1 million-square- foot data center and back-up space in Pearl River, N.Y.

Brokers are reporting an uptick in interest in the suburban area, where electricity is not only reliable but cheap.

“We’re seeing a lot more activity in Rockland County,” said Martin Cottingham of Avison Young, an exclusive broker for 1 Ramland Road, a new 232,000 square-foot data center and disaster recovery center in Orangeburg, N.Y. “One of the things we’ve found most appealing is the cost of electricity… — $0.08 per kilowatt hour compared to $0.18 in New York City, or $0.12 or $0.13 in New Jersey.”

While Rockland County’s appeal is on the rise, Long Island and New Jersey — areas that also have data centers — are struggling. Long Island has lost its luster because of the Long Island Power Authority, taken to task by Gov. Andrew Cuomo for its slow response times, and New Jersey because of its generally expensive electric rates.

“People don’t want to go to Long Island for obvious reasons,” said Andrew Popik, president of Datastructure Management, who has operated data centers in Rockland County. He added later: “There is a lot of back up in Jersey City, (but) that’s something we would never recommend [to prospective tenants].”

The demand is also coming from industries such as health care that haven’t traditionally used data centers, brokers said.

Still, the uptick in interest will eventually ebb, Popik predicted.

“There are a lot of people calling. We call it ‘the half-life of pain,'” he said, explaining that worst-case scenarios are fresh in tenants’ minds immediately after a natural disaster like Sandy.

The memories are sure to fade, though.

“If I had had half- a-million square feet of [data center] space available the day after the hurricane, I wouldn’t be talking to you, because I would be on an island.”