October 11, 2001 -- A month after the terrorist attacks on America, the fallout from Sept. 11 is rippling through the data center and colocation industry.
The attacks on New York and Washington have prompted a nationwide surge in interest in disaster recovery services, and have boosted demand for data center space in the New York market.
But a dramatic slowdown in corporate spending has hurt struggling providers who hoped strong sales efforts could fix their financial woes. This realization has accelerated cutbacks and led several companies to consolidate their data center networks.
The additional inventory of built-out facilities coming onto the market has exacerbated a glut of available data center space, adding to the challenge of leasing large chunks of unfinished shell space.
To assess the state of the industry and the economy, CarrierHotels.com gathered analysis from a cross-section of industry veterans, which are summarized in this special report.
The overall forecast: more tough times ahead, with pockets of promise.
"We need to remember that the data center/colocation industry was in awful shape on September 10th," said Tony Wanger, a senior vice president with Sterling Capital, which operates several carrier hotels.
Two trends have emerged that may stimulate demand - the immediate need for to replace data center space destroyed on Sept. 11, and a renewed focus on data security and disaster recovery.
"I expect the increased demand to be particularly heavy in the New York metropolitan area, where people suffered emotionally from this tragedy and are more likely to act as a result of these events," said Jeff Moerdler, a telecom attorney at Mintz Levin's Manhattan office.
Facility owners in northern New Jersey with available space report strong interest from displaced companies with an immediate need for space.
But that regional strength probably won't be enough to alter the overall industry outlook.
"The negative nationwide effect of the Sept. 11 tragedy on demand is somewhat counterbalanced by the sudden need for more space in New York City, but I expect the overall effect to be somewhat negative," said Jon Forsyth, principal in StratSoft, a research firm that specializes in the data center market.

NEXT: Disaster Recovery Gains Traction