Once a perk reserved for the tech industry, fast, reliable and redundant Internet connectivity is now a necessity for a growing number of office tenants, and experts say landlords and local governments around the country are wiring up to attract the most coveted companies.
Traditionally, for a company like Google Inc. or Twitter Inc. that depends on constant high-speed connectivity, the best bet was to find a building that was very well-connected such as an existing data center and lease space there.
Now, the number of companies that rely on such connectivity is growing; it's not just Internet companies such as Google and Twitter, but also many members of the new TAMI class of tenants — tech, advertising, media and information — that see a lack of robust connectivity infrastructure as a dealbreaker.
“Internet connectivity has gone from being something that everyone wants, to being a critical function,” said Kevin Collins of C&K Properties, which owns 2 Gateway Center, a commercial complex in Newark, N.J., close to the largest collection of Internet fiber on the East Coast. “Businesses can't operate any longer without having reliable and redundant Internet connections.”
Many tenants see connectivity as being as vital as any other utility, and landlords with buildings already conveniently located near large collections of fiber or with large data centers as tenants have already capitalized on this over the last several years.
At 2 Gateway Center, C&K Properties courted Standard Chartered Bank in 2008, signing a lease with the international bank's clearing operations unit, which has a high demand for speed, security and redundancy in its Internet connection. The building was originally built for Western Electric, so it was already ahead of the game in terms of wiring, according to Collins.
That, in addition to the fact that the East Coast's main “fiber spine” runs directly through Newark and that the city is also home to one of the country's largest so-called carrier hotels where various telecommunications providers have their facilities, has made the area a growing magnet for TAMI tenants.
The same is increasingly true for Lower Manhattan and the west side of the city, with the most prominent example being Google's 2011 acquisition of 111 Eighth Ave., a nearly 3 million-square-foot Chelsea building that is itself effectively a “carrier hotel," according to Rick Drescher, managing director of technical services at Studley Inc. The need for redundancy so that the company would never be offline was a huge draw to the building...
There are only so many buildings like 2 Gateway Center and 111 Eighth Ave., so experts say owners of more traditional office buildings looking to attract TAMI tenants are increasingly preparing for them by bulking up on connectivity infrastructure, Drescher said.
This means wiring buildings with services from various companies in order to give tenants choice and reliability. It helps attract good tenants while also allowing landlords to potentially charge higher rents for the convenience.
“In the areas of the city where a big tech boom is going on, I think the landlords are just smart enough to know they need to reach out proactively to the phone companies and providers and are getting servicers into the building, because it will draw tenants there,” Drescher said.
The “if you build it, they will come” model of connectivity infrastructure is increasingly popular both in large urban centers and outside them.For Office Tenants, Strong Connectivity Becoming Must-Have
Related StoriesData Center Demand: Will REITs Take Notice?
New Jersey Grabs Data Center Real Estate From New York