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Issue 16, June/July



With 10 Silicon Valley builds under his belt, one of the region’s most seasoned data center developers tries a container play. Yevgeniy Sverdlik fi nds out why Les Pelio’s builds have managed to withstand the test of time


eslie Pelio built his first data center around 1998. He built it for one of the few colocation providers that existed in Silicon Valley at the time.

The large colocation players of the world –the Equinixes and Digital Realty Trusts – were being formed. “We had a tenant, the first person I knew of who was doing colocation,” the long- time Silicon Valley developer recalls. “I wasn’t really familiar with data centers.”

“No one understood what the client was doing: selling off racks,” Pelio says the tenant wanted to expand an existing

building he owned,

which happened to be sitting on top of a major telecommunications loop.

Pelio recalls how both the tenant and he went to the local utility, Silicon Valley Power (SVP), and asked if they could get enough power to the site. The SVP representatives’ initial response was “no way”. “You’re never going to be able to use [all] that,” they said.

Even though they were asking for less than 1MW, the power density per 1 sq ft was unheard of at the time. The arrangement of the racks on the data center fl oor, and the power requirements of the equipment the racks would hold, took some explaining before SVP agreed to deliver power.

In the late 1990s, when there weren’t many developers building data centers yet. Pelio, which had until then been specializing in warehouse and R&D facilities, saw an opportunity.

About 1.5 years after building its fi rst data center the developer was constructing another R&D building in the same area. A company called Williams Communications came to Pelio and asked to lease the new building. Pelio then bought another piece of property in the same location, constructed another facility on the land and leased it out once complete. It then bought another three existing buildings in the area, knocked down two, kept one and built a new one on the property. “We knew that was probably one of the premier locations (for data

centers) because of all the connectivity and substations,” Pelio says.

The leases were mostly with carriers in need of data center space, of which there was no shortage. “We would get to the point [of being] 30 days away from getting power to a building, and somebody would [bang] on our door.”


Pelio and Associates, a Silicon Valley developer, has played a part in the highest number of data center builds in the region. Pelio has erected 10 data centers in Santa Clara, the latest of which is quite a departure from the company’s traditional strategy.

The newbuild will provide space, power and cooling for containerized data centers. The plan is to either have customers put their own containers in the building, or to lease space within Pelio-owned containers.

As of early May, the developer had not been able to secure a tenant for the site but had been in active discussions with IBM and PDI, each of which has a containerized data center product.


Compared with the 1990s, today’s market could not be more different. With so much new capacity added in the Valley in 2010, and more expected to come online this year, competition is tough, and many in the industry expect this dynamic to bring colocation rates down.

DuPont Fabros, Digital Realty Trust, Vantage, QTS and CoreSite are just some companies building big in the region. The question is, will there be enough demand for all this space? “It’s hard to say,” Pelio says.


During the dot-com boom, which lasted from the late 1990s to early 2000s, lots of developers were interested in building data centers. The problem was they were building in areas not suitable for use, without very dense in fi ber or a nearby utility substation, according to Pelio.

Some of the buildings that went up in the region back then did not lease at all, or were leased to dot-com companies that did not survive the bust. When the bust came there were a lot of vacant buildings on the market. In many cases owners pulled all the data center equipment out and turned them into standard R&D facilities.

“The buildings I have done have all remained as data centers,” Pelio says. We were doing the right type of building in the right location. We sort of understood… more about what we were doing than many other providers, because their buildings are no longer data centers today.” n

DatacenterDynamic’s San Francisco event will address further challenges for the Silicon Valley data center market on 16 July, at the Hilton San Francisco. Speakers include Principal and Vice Chairman of ASHRAE Mark Hydeman, Broadcom CTO Nick Ilyadis and Mission Critical West Inc founder and CEO Dennis DeCoster. For more visit 41 An IBM data center container is unloaded at a Pelio and Associates data center in Santa Clara

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