REITs vs Privately-Owned Data Centers

Jun 21, 2016 | Data Centers, Insights

Data center ownership is not usually something companies consider when they are looking for colocation or disaster recovery services. Security, redundancy and construction are often discussed. These are indeed important factors to consider when making a decision, but the type of ownership a data center is under can sometimes determine these important deciding factors and others, such as the quality of managed services offered.

What is a REIT-owned data center?

REIT stands for Real Estate Investment Trust. REITs answer to multiple shareholders that earn dividends on square footage that is sold or leased. REIT data centers are typically publicly-traded companies whose stocks are sold on major market exchanges. In order to be considered a REIT for tax purposes, 75% of the company’s profits must come from rent, managing fees or leasing properties, and 90% of their taxable income must be distributed to investors. REIT data center companies sometimes rent properties, retrofit older buildings and re-lease space for colocation.

What is a privately-owned data center?

Privately-owned data centers are owned by individuals or small groups of people who are usually involved in the data centers’ daily operations. Its shares are not traded on the public market, and their facilities are normally owned and not leased. Their employees often have a stake in the company, and stakeholders are IT-focused rather than real estate focused. These companies also typically own more purpose-built facilities than retrofitted older buildings.

What are the advantages of privately-owned data centers?

  1. Because privately-owned data centers don’t have strict parameters on their sources of income, they do not have a limit on the percentage of income they can derive from additional customer services. Privately-owned data center companies aren’t required to focus on leasing square footage and can focus on the individual needs of the customers. For example, in addition to deployment set-up, Data Foundry provides network monitoring services, managed firewalls, network services, intrusion detection services and more.
  2. Privately-owned data centers are able to set colocation rates based on power requirements instead of focusing on square footage. This gives customers the option to have denser deployments, which reduces the number of cabinets and patch panels needed and the amount of cabling required to complete the deployment, lowering the cost of infrastructure. Whether having more space or fewer cabinets is more important to the customer, privately-owned data centers have greater flexibility to accommodate their needs.
  3. Lastly, data centers that are privately-owned tend to be purpose-built rather than retrofitted. This means every aspect of the data center was built with the customer in mind, from sizing of doors to roof support. For example, Data Foundry’s purpose-built facilities have telecom and electrical conduits underground, so there is no need to use a ramp to move equipment in and out. Purpose-built data centers are designed to higher construction and performance specifications that make them capable of withstanding extreme weather conditions. All electrical and mechanical assets are situated where they are most secure and easiest to maintain. Purpose-built data centers also tend to offer greater redundancy, stricter security and more efficiency than retrofitted facilities.

Read our white paper on Purpose-Built Vs Retrofitted Data Centers to learn more