With the demand for computer storage on the rise, developers are giving dilapidated downtown buildings new life as telecom "hotels."
The 21-floor art deco building that originally served as the headquarters of Home Savings Bank in Albany, New York, had fallen on some hard times since the bank was merged out of existence in 1991. With a glut of office space in the area, subsequent owners didn't have much luck in filling one of downtown Albany's tallest buildings.
Two years ago, the building was just one-third occupied. But today, under new ownership, it's more than three-quarters full. Yet there are still very few people walking the halls of 11 North Pearl Street. The newest tenants in the building are computers, cables, and switching equipment, the backbone of the nation's Internet and telecommunications infrastructure. The 73-year-old bank building is now a high-tech "carrier hotel."
As the world becomes more wired - and wireless - there's a great demand for space to put the racks of machines that store Web pages, route e-mail, send pages, and transfer phone calls and financial information. Ironically, this has given a new lease on life to older downtown behemoths and edge-of-town industrial buildings located by railroad tracks that just a few years ago were seen as commercial pariahs.
Carrier hotels, also known as telecom hotels or data centers, have become one of the hottest sectors of commercial real estate in the last few years. At least 400 carrier hotels exist across the United States, and new ones come on the market every month. Worldwide, the market for carrier hotels is expected to grow by more than 30 percent a year for the next five years until it reaches more than $55 billion at the end of 2005, according to Ovum, a consulting firm with offices in Boston, London, and Melbourne.
What all these buildings have in common is plenty of electricity, high ceilings, thick walls, strong floors, and nearby access to fiber-optic cable - the perfect environment for telecommunications firms, Internet service providers, and financial institutions to park their back-office computers. Access to fiber-optic cable, which can cost as much as $1 million a mile to install, designates the neighborhoods that are ripe for carrier hotels. Prime locations are usually downtown neighborhoods, which tend to already have fiber-optic cable used by banks and financial service companies, and industrial areas near railroad lines, where fiber-optic cable is often buried.