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KDC, State Farm Insurance to Deliver Speculative Data Center in North Texas

131,000-SF Data Center is Expected to be Marketed to Would-Be Tenants Seeking Space in Richardson
July 20, 2018
State Farm Insurance is teaming up again with Dallas-based developer KDC to begin work on a new speculative data center, hoping to meet growing demand for data-crunching space in North Texas.

The 130,629-square-foot data center is being designed for an eight-acre tract at 1510 E. Lookout Drive near the Bloomington, IL-based insurance company's own similarly-sized data center. Real estate sources said State Farm Insurance and KDC plan to market the speculative data center space once the partnership delivers a power shell.

The insurance company, which employs nearly 10,000 people in its regional hub in Richardson, is involved in the development because the parcel is owned as part of the company's investments, said Benjamin Palmer, a State Farm's public affairs specialist.

Palmer declined further comment, saying, "State Farm considers its real estate and investment strategies as proprietary," and wouldn't discuss the details of the would-be development externally.

KDC and State Farm Insurance officials filed for parking variance for the Richardson development tract with the city's plan commission. Officials with KDC did not immediately respond to interview requests.

The decision to develop a speculative data center, or power shell structure, isn't something new in North Texas, which continues to be one of the big data center destinations in the United States.

Other developers, such as Stream Data Centers and Skybox, have also built power shell structures before selling them to data center operators for completion.

With the demand for data center space in Dallas-Fort Worth on track to grow exponentially this year, CBRE Data Center Solutions executive R. Haynes Strader Jr. said he expects newly developed power shell structures to feed into the frenzy for data center space in the region.

"Dallas has ample supply of data center space in the market, but there is now a shortage of powered shell space with only a few in the market," Strader, a senior vice president in CBRE's Dallas office, told CoStar News. "CBRE Data Center Solutions team is predicting that 2018 absorption will dramatically exceed previous years because of the hyperscale deals in the market."

Historically, Dallas-Fort Worth ranks as a top U.S. data center market with roughly 40 megawatts of absorption. This year, Strader said him and his team are predicting North Texas to absorb 60 to 80 megawatts of data-crunching space -- a significant increase in leasing velocity tied to hyperscale users.

Those hyperscale users include leading industry firms such as Microsoft, Oracle, Facebook, Amazon and many others. Other than Dallas-based Softlayer, a division of IBM, which continues to grow its data center footprint in the region, Dallas-Fort Worth has yet to see a major recent entry to the market.

If hyperscale users lease up to 80 megawatts in the Metroplex, Strader said all the supply in the market could be gone. That could be one reason why developers are continuing to build in the region.

The project details for the new Richardson data center were not immediately available. However, CoStar data shows the new data center was slated to begin in September.

Candace Carlisle, Dallas-Fort Worth Reporter  CoStar Group   
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