China Mobile Expands Plans for San Jose Data Center as IT and Cloud Industries Continue to Rapidly Lease Space

By Meghan Hall

Silicon Valley’s data center market is one of the strongest in the country, with its proximity to the world’s major tech companies and an ever-growing IT and public cloud industry driving demand for wholesale capacity. That demand is something that the world’s largest telecom company, China Mobile, has picked up on. The Chinese state-owned corporation originally submitted plans in the fall of 2018 to develop a five-story, 217,000 square foot data center with 65,000 square feet of office space located at 6320 and 6340 San Ignacio Ave. in South San Jose. Now, according to recent public documents, China Mobile intends to construct a 307,432 square foot center on the 2.7-acre site.

“We are closely watching supply and demand trends across the U.S. data center market in 2019 and beyond, particularly as data consumption — driven by the adoption of big-data analytics, 5G, gaming, streaming services, edge computing and the internet of things — continues to drive growth,” said Pat Lynch, senior managing director of Data Center Solutions at CBRE in a statement regarding the firm’s most recent analysis of the U.S. data center market. “Meanwhile, we’ve seen robust construction activity as operators try to position themselves to rapidly deliver facilities within users’ often-tight schedules.”

According to an addendum issued for the project’s Environmental Impact Report (EIR) dating to March of this year, the data center portion of the building will be approximately 243,381 square feet. The center would house computer servers in a secure and environmentally-controlled structure, and would be designed to provide 20 megawatts (MW) of information technology (IT) power. The amount of office space allocated decreased slightly, to 64,051 square feet. Project documents indicate that the center would accommodate up to 200 employees.

The project would consist of two data center wings connected by curving office component and a large courtyard. The data center wings would each be two stories, and approximately 45 feet in height, with a 20-foot louvered screen around mechanical equipment housed on the roof. The office portion of the development will be five stories in height. China Mobile has also increased the number of parking spaces on site from 194 to 215.

China Mobile anticipates that the project will be occupied and operational by December 2020. However, the company still needs to finish acquiring entitlements, including a Special Use Permit, before the development can break ground.

Currently, the project site is developed with a two-story, 162,553 square foot office and R&D building and associated parking area. The building was constructed in 1982 and will be demolished in order to accommodate the new development. China Mobile purchased the property in January 2018 from New York City-based DRA Advisors for $12.19 million, according to Santa Clara County public records.

Once complete, the new data center will join several others in San Jose currently in operation. Redwood City, Calif.-based Equinix has a data center nearby and several others, such as Digital Realty, CoreSite and Telx, have data centers closer to downtown. The site’s location in south San Jose also means that it is easily accessible by car and is just a few minutes’ drive from U.S. Route 101, State Route 85 and Great Oaks Parkway.

According to a recent CBRE report, Silicon Valley ended 2018 as the second-most supply constrained data center market in the United States, with a vacancy rate of seven percent. In 2018, Silicon Valley saw 25 MW of net absorption, and despite 32 MW of new capacity in 2018, supply is still limited, states CBRE, due to acquisition and land costs in the Bay Area increasing more than in other primary markets. Without additional supply, CBRE predicts that content providers and IT companies could move to larger data center markets, such as Phoenix, Ariz., or Northern Virginia. Currently, few large blocks of capacity are available, with only 14.5 MW under construction at the end of 2018.

“In 2018, the majority of the larger Silicon Valley data center leases were signed by companies headquartered in the Bay Area by firms based in the Asia-Pacific region,” said Jennie Karnes, vice president at CBRE. “Generally, demand here is driven by regional Bay Area-based technology companies and cloud providers, but the lack of availability for large amounts of space last year was a limiting factor for many of these high-growth companies, who can lease 20 MW or more at a time.”

Eric Ruan, China Mobile’s project manager, could not immediately be reached for comment.

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