NEW YORK, March 5, 2002 -- The consolidation of the Internet data center industry is heating up, as acquirers begin to close deals and shop for vacant facilities, according to panelists at the Information Management Network's second annual Forum on Carrier Hotels and Internet Data Centers.
Demand is coming from several sectors, they said, with government agencies and large corporations eyeing premier stand-alone facilities, while "consolidators" are seeking bargains at the low end of the market.
The two-day IMN show at the Roosevelt Hotel produced no clear consensus about whether the data center industry's long slide has finally hit bottom.
But several panelists perceived a historic opportunity in today's depressed valuations, mindful of the old saying that landlords make their money when they buy a building, rather than when they sell it.
"A lot of people in real estate have made tons of money at this point in a cycle," said Jonathan Rudes, chief operating officer of William B. May International. "I think there are opportunities everywhere."
With a growing number of sales in recent months, it's clear that many potential acquirers are shifting from analysis to action.
EXDS Inc., the former Exodus Communications, has recently sold four of the 15 data centers not included in the sale of the Exodus brand and business to Cable & Wireless. Buyers included Deutsche Bank (Parsippany, NJ), Freddie Mac (Herndon, Va.), Q9 Networks (Toronto) and Dell Computers (Austin).
"We're seeing major enterprises and Fortune 500 companies driving the demand," said Ham Southworth, senior director of real estate for EXDS. "We think that's where the future deals will be."
Security-conscious government entities are actively shopping in the Washington suburbs, according to Hossein Fateh, a principal in DuPont Fabros Development, Exodus' landlord in the Ashburn Corporate Center in Loudon County, Va..
"We've found a great amount of interest from government agencies," said Fateh. "These agencies are taking up hundreds of thousands of square feet, especially in Northern Virginia."

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