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Q&A: Robert Guller, Bandwidth Exchange

Carrier Hotels Staff Posted Mar 1, 2004

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Robert Guller is the Managing Member and Principal of Bandwidth Exchange Buildings, L.L.C., which operates more than 500,000 square feet of telecom and data center space. Their customer list includes the nation's premier long haul, local and data providers. Guller received a law degree from the University of Michigan at Ann Arbor and holds an M.B.A. and a B.A. in economics from the University of Texas at Austin.

1. What's your take on the "State of the Industry?" What do you see as the most important developments and trends of the past year?

I believe we are finally beginning to see signs of the long awaited turnaround. The customer base is finally budgeting for new capital expenditure. Meanwhile the demand for hosting and managed services from the middle-market has steadily continued to grow, driving the demand for data center space from providers in this area. The most important development has been the power grid failure and the reliability challenges arising from the failure. This leads to the trend of increased focus on power availability and reliability.

2. How have bankruptcies and their outcomes affected the competitive landscape? Has it been more or less disruptive than you expected?

The bankruptcies have had a clearly split effect. They have illustrated the difference between mature established carrier hotel facilities housing critical infrastructure and those less established latecomers. Where bankrupt tenants maintain economic value generating network operations etc., the leases have been continued through bankruptcy and after to the new, better credit successors. Where raw or even improved space was unused, leases were terminated and placed back on the market. Those landlords with a balanced mix of tenants have been able to survive the temporary cash flow interruptions of bankruptcies relatively unscathed. We have also seen local or regional I.T. companies or web hosting companies move up in prominence as replacement tenants for bankruptcy losses.

3a. For landlords and property owners: What's your assessment of the current market for leasing of data center space? What trends are you seeing in demand for space and lease rates?

Currently the last of the large overhang of empty but improved data center space is being absorbed. This has created pressure on the market as a whole keeping leasing rates stagnant. However, a tremendous amount of this overhang has been absorbed and once it is gone, it is gone. Little new space has been created and improved recently. We expect the demand that created the absorption to remain constant and a healthy upturn in price as the supply shrinks.

4. Give us your outlook for 2004. What are the key trends you see affecting the industry?

Increased capital spending driving new demand, grid computing (Google and similar applications) driving demand for the highest concentrations of power and cooling seen to date in large quantities, the absorption of the remaining abandoned improved data center space and a supply crunch thereafter.