New York, N.Y. — John Holusha reports that there has been a lively trade over the last few years in converting old industrial buildings so telecommunications companies can use them to house switching devices that connect one party with another in the heart of this densely populated region.
Now, one of New York City’s larger landlords, Max Capital Management, which owns eight million square feet of office space, is proposing another type of technology installation. It plans to build a data center, sometimes called a server farm, in Newburgh, N.Y., about an hour’s drive north of the city in the heart of the Hudson Valley.
Adam Hochfelder, the president of Max Capital, said data centers are different from the telecommunications centers, which are often known as telco hotels because they house competing, but also connected, communications companies. Data centers, he said, are homes to the banks of computers, called servers, that underpin the World Wide Web. A person who goes to a Web page is connected to one or more of these computers, which relay information in response to mouse clicks and other commands.
Many companies in the Web-hosting business are not yet household names (Exodus Communications, Globix), but Wall Street analysts say they are poised for explosive growth as business-to-business commerce surges on the Web. One estimate prepared by Salomon Smith Barney said that revenues from Web hosting and related services should triple to $9 billion by the end of 2001.
Mr. Hochfelder, who works in Harry Helmsley’s old office on the 17th floor of 230 Park Avenue, said Max Capital will begin building a 240,000- square-foot data center on the site of a self-storage warehouse by the end of this month. The company, he said, will go ahead with the project on speculation if a tenant is not found before work begins.
He said requests by tenants, particularly DoubleClick, an Internet advertising company at 450 West 33rd Street, convinced him of the need for data center space. “Tenants were coming to me and asking if we had some basement space or someplace where they could do Web hosting, and the answer was no,” he said. With vacancy rates in Manhattan near record lows and average rentals near $50 a square foot, finding space in the city was difficult.
“Then DoubleClick came to us and said, `We need Web-hosting space and we need 100,000 square feet of it at $20 a foot,’ ” Mr. Hochfelder said. So he started looking outside the city, and his gaze settled on a 40,000- square-foot warehouse near the New York State Thruway in Newburgh.
“I bought it in 1996 for low-cost self-storage,” he said. But because it is near the Thruway and the former Stewart Air Force Base, the building is near some of the major fiber optic lines that carry Internet traffic and other telecommunications traffic.
Telecommunications carriers have tended to place their fiber cables along railroad and highway rights of way to avoid having to negotiate with multiple landowners. And since the Internet has its roots in Arpanet, which was a communications system designed to survive a nuclear attack, military properties were well wired, as well.
While it is useful for telecommunications carriers to be near densely populated areas, Mr. Hochfelder said, distance was not an impediment if a building was connected to fiber backbones. “I point out to people that ESPN does its Web hosting in Ireland,” he said.
The New York architectural firm Thanhauser & Esterson has been hired to design a two-story building. Although it will incorporate the former warehouse, the building, to be called the TechCenter @ Newburgh, will include features that high-technology tenants demand, like high ceilings, widely spaced columns and provisions for robust air conditioning, redundant power and telecommunications connections.
Mr. Hochfelder said he was not certain how to market the building, which is expected to be ready for occupancy next August. But he seems eager to get an inside look at how the data center business works.
“I could lease the building to a data center operator like Exodus or Globix and just collect rent for 20 years,” he said. “But I might do a joint venture with a company to run it. That way I’d be a data center operator and not just a landlord.”