Colocation Prices Remain Firm As Centers Grow
Study: Larger facilities help U.S. providers address 'colo cramp'

Jan. 30, 2001 -- The "colocation cramp" in North America is beginning to ease as new facilities come online, but prices remain strong, according to new data from the online exchange Band-X.
The average rack price for U.S. colocation space rose 7.5 percent in the fourth quarter of 2000 to $924, compared with an average of $771 for Europe, where facilities have traditionally been much larger. (See chart)
The findings were based on Band-X's quarterly survey of 90 different colocation providers listing space through the London-based exchange.
The survey found that the average size for new colocation facilities in the U.S. leaped 40 percent, rising from 1,300 square meters (13,988 square feet) in the third quarter to 2,100 square meters (22,596 square feet) by the end of the year.
Despite the increase, that's still less than the average size for European providers listing with Band-X, which increased by just over 10 percent in the fourth quarter, rising from 4,867square meters (52,368 square feet) to 5,368 square meters (57,759 square feet).
For all of 2000, average prices on the Band-X exchange jumped 38 percent in North America, compared to an annualized rise of just 5.3 percent in Europe.
"The price squeeze in the U.S. over the last year reflects the fact that the North American colocation market has traditionally been driven by the real-estate sector - if you want fully fitted space you would go into a building and do the fit-out yourself,'' said Tim Anker, vice president of colocation trading at Band-X.
"But today, because build-out time is so critical, the off-the-shelf solution offered by colo providers is becoming much more attractive - the market simply hasn't been able to match this demand, hence the price rises,'' he added. "The carrier neutral colocation market that we deal in continues to evolve at an unbelievably fast pace, with more and more facilities emerging all the time whilst those that are built rapidly fill up."
Band-X launched a "virtual market" for international wholesale telecom capacity in 1997, becoming the world's first telecom-specific trading exchange. It has an international membership of over 13,000. Band-X Inc., established in May 2000 is the wholly owned American subsidiary of Band-X, and remains a private company co-owned by Goldman Sachs, Morgan Stanley Dean Witter, Madison Dearborn Partners and the founders.