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2022

R E S E A R C H R E P O R T

CBRE Data Center Solutions Report

Prepared by Birva Pinto Brian Rivera Daniela Villacis Ella Mukasa Jason Baires Maria Melillo Reinaldo Araya

G o l d m a n S a c h s L o c a l C o l l e g e C o l l a b o r a t i v e P r o g r a m 2 0 2 2

T A B L E O F C O N T E N T S

TABLE OF CONTENTS

Highlights

C B R E M A N A G E S T I E R I I I

01

02

05

07

Executive Summary

CBRE Services and Values

Exploring Ideal Locations

10

13

17

19

Efficiency

Competitors

Works Consulted

Data Center Classification

Acknowledgement

D A T A C E N T E R S T H A T H A V E

" N + 1 " A V A L I A B I L I T Y

C B R E H A S A N U P T I M E

R A T E O F

9 9 . 9 9 9 6 8 %

T H E D A T A C E N T E R I N D U S T R Y I S

E X P E C T E D T O G R O W 1 5 . 3 %

F R O M 2 0 2 1 T O 2 0 2 8

EXECUTIVE SUMMARY

CBRE is firstly a commercial real estate firm. CBRE Data Center Solutions is a division within CBRE that offers clients to consolidate their data center needs with their real estate ones. CBRE's vision, according to their website, is to "Deliver superior outcomes for occupiers, residents and the communities in which we build. Deliver market-leading financial returns to our investment partners. Attract and retain top talent by upholding an entrepreneurial and rewarding work environment." For CBRE to continue to expand on its values and mission, it must uphold standards that have kept them at the top of the commercial real estate industry.

The world of data centers is evolving rapidly; they are now considered the digital economy's powerhouses by clients and investors alike. As a result, businesses are now moving at an accelerated pace to adopt a digital strategy in response to the technological advancements taking place in the world. Notably, companies such as CBRE have recognized the importance of data centers and have expanded their integrated services. .

CBRE's focus has previously been purely a commercial real estate one, expanding their Data Center Solutions division is a slight change. Adding data centers to CBRE's services offered proves to be in alignment with CBRE's goals. CBRE Data Center Solutions is the next step in offering complete commercial real estate solutions to their clients. Educating prospective clients that data center services should also be considered when they think about their real estate needs is a priority. Attracting those clients to think about CBRE as a data center solution will expand profit centers and services to future clients.

P A G E 1

The Hudson Group has recognized several key concepts that influence CBRE Data Center Solutions in their decisions, the potential for success, and costs. The Hudson Group explored some potential issues and suggestions on how to approach improving the problems associated with data centers. CBRE wants to ultimately increase its Return on Investment (ROI) and its market share in the data center industry. The way the Hudson group has determined this goal to be attainable is through increased sustainability efforts, increased data center efficiency, lowering costs, and attracting more customers towards new and improved data center services.

To understand the challenges of CBRE data center solutions, several factors must be examined:

· How the location of a data center has a direct influence on costs

· How CBRE's scope of services offers them a competitive advantage

· How their competition compares to CBRE locally, regarding sustainability and regarding cloud computing

· What CBRE is currently doing and focusing its efforts

This report also will expand on some of the industry advances that have proven to help increase efficiency, reduce costs, and increase sustainability.

CBRE'S SERVICES AND VALUES

CBRE'S Values

CBRE Data Center Solutions aims to increase its client base without compromising its service. Their customers expect analytics to reduce risk, forecast capacity, and unlock the maximum value of data center assets. The way CBRE approaches each client is primarily by considering their needs. From this point, CBRE advises the client on diverse verticals and geographies. CBRE aims to create a data center environment that attracts employees and customers alike as the data center industry is growing rapidly; this expresses key indicators that CBRE intends to adopt environmentally sustainable solutions. CBRE promises their customers to "transform the way data centers are operated, help drive improvements in reliability while simultaneously reducing costs.".

CBRE prides itself on maximizing data center operation times, placing talent and risk management at the center of its operational approach. According to their website, CBRE aims to uphold the following values:

Services that are constantly in operation Adherence to safe measures always Quality and operational excellence

The use of monitoring and analytics to reduce risks Efficient operational services

Supply chain services

Cost reduction to unlock the maximum value of data center assets

P A G E 2

CBRE'S Services

CBRE works to provide the best services with over 3,000 project managers and their engineers that are well trained to solve any kind of problem the companies' data center may have. These are the information technology and operations services that CBRE offers:

Operational Services: To focus on strategic initiatives (Data Centre and IT Consulting and Managed Services)

Administrative Ease: One vendor, one contract, one invoice for IT infrastructure services

Cost Savings: Team to supply the services (Contract and Lease Negotiation)

Operational Alignment: Increased communications and strategic alignment across sites and portfolio (Colocation, Market Research, and Forecasting)

Decreased Risk, Increased Transparent: Increased visibility into all operations. No barriers between IT and FM staff.

Staff Retainment: Defined career paths, upward mobility, and data center-specific training opportunities.

Programs CBRE offers its clients

CBRE works with different programs to help their customers and partners:

· Integrated Data Center Operations Program or also known as DC360:

It has everything a data center needs to function in the best way from supplying the full suite of design, operations, maintenance, to strategy services for data center end-users. Aims of DC360 are to reduce CBRE customers' total cost of ownership by 20%, they also lower human factor-based risk by up to 80%. This is due that 90% of the accidents that occur are due to human error.

· CERM TM or Critical Environment & Risk Management:

CBRE decided to work with CERM TM, Critical Environment & Risk Management). Because this company has a fully computerized program that helps to reduce the number of errors in the data center of CBRE customers. This means it would help to:

Significantly reduce operation at risk of incidents Reinforce the culture of risk awareness Improves service levels and performance

Risk Management Portal – CERMTM Quantum Real-time management of critical risk factors Improves risk visibility to customers

Colocation and Hyper-scale Data Centers

CBRE also offers colocation and hyper-scale data center services to fit their clients' needs. A colocation data center is a facility in which the data center owner rents out rack space to other businesses. This service, offered by CBRE, is helpful for smaller businesses that want to reap the benefits of data centers but do not have the resources to maintain them. The company has also highlighted how colocation facilities benefit scale, consistency, and flexibility. CBRE highlights how colocation operations are advantageous as they are more sustainable than enterprise data centers.

Hyper-scale data centers are significantly large data centers. As a result of the advantages of economies of scale and custom engineering, they significantly outperform enterprise data centers. CBRE favors hyper-scale data centers for numerous reasons. Firstly, they highlight that even a tiny percentage of energy savings can reduce CO2 emissions and costs due to the scale of energy usage in these data centers. CBRE acquired the company Romonet in 2019 and now holds rights to their patented cloud-based technology, which is used to unlock efficiencies and increase capacity at data centers.

Romonet

With the COVID-19 pandemic forcing millions to work from home, the cloud allowed employees to have a virtual space to access applications and data (CBRE Research). This downsizes the usage of office-based server rooms, allowing companies to have more flexibility and stability for operation.

Romonet is a software database provided by CBRE. They claim to provide a platform that uses analytics to predict the performance of a data center's investments and operations. The software does calculations and allows companies to improve on their energy and financial objectives.

In a case study with Fujitsu (a leading multinational IT equipment and services company), which has been a client of CBRE since 2005, Simon Levey, Head of Data Centre Development, UK and Ireland at Fujitsu, and his team had three objectives: maximize available capacity, continually improve efficiency and deliver measurable business outcomes. To achieve this, they required a combination of advanced analytics and operational intelligence. This toolset had to show the current state of each facility and which areas or equipment needed to be optimized." (Romonet)

After only two months, Fujitsu was able to see their return on investment, the benefits that came from using the program came with the enhanced decision-making process, which allowed them to decrease costs on purchasing decisions and research, technical issues were reported quicker, and the elements of the platform suggested ideas to improve efficiency (Romonet)

P A G E 4

Romonet also added a new tool for business leaders and operational staff to understand the differences in performance with the design in data centers. According to the article they claim "The tool enables users to compare the energy, PUE (Power Usage Effectiveness), energy-cost and CO2 performance of each design across many different climates in Europe and North America. Currently, CBRE | Romonet's tool covers 69 locations in the US and 22 locations in Europe, and the company plans to continue adding locations as its data grows." (Romonet)

EXPLORING IDEAL LOCATIONS

As the data center industry grows year after year, many companies look to make their mark and insert themselves into this industry. Many companies, with specific ways of making their way into this market, have expectations to be highly profitable in the future. These companies have several factors to consider when picking an area to start building their data centers.

Texas

States like Texas and Illionois both offer very appealing tax incentives when dealing with data centers compared to other states that don’t give any incentives. Texas is a very business-friendly state with desirable tax codes that are hard to refuse in comparison to other states which have no incentives at all. Texas has House Bill 1223 that exempts private property taxes on anything “necessary and essential” to running such a facility. The exemption covers critical IT equipment and electricity. However, a minimum size requirement of 100,000 square feet (about the area of a Manhattan city block) means that a large facility could house multiple data centers that qualify for these tax breaks. Texas’s exemptions make this state an incredibly attractive area since there is a lot of land there that can be used to build new centers or take an old building and create a data center out of it.

North Carolina

There are states that are making their way toward more renewable energy to lower their carbon emissions. Renewable energy can lower fuel and electricity costs thus increasing reliability and air quality while still creating more jobs. Some states are worthy of investing in due to their incentives to push for renewable energies. North Carolina leads for renewable energy, with $1.02 billion invested into USDA programs. Additionally, North Carolina is ranked 11th for the number of total policies/incentives toward renewable energies. Arizona also is highly ranked with wanting change in their renewable energy production. Arizona is 14th for the number of policies/ incentives the state has put encouraging renewable energy development. These states are appealing in terms of building new data centers. They are well populated and their investments in renewable energy would further help CBRE to attain their goal to be more sustainable.

Arizona

Arizona is another state with many data center-friendly tax breaks. House Bill 2488 exempts the transaction privilege tax for data center construction, IT equipment purchases, and related energy expenditure. House Bill 2009 also provides financial incentives for data center owners and operators and colocation tenants. Arizona exemptions are nothing not to consider when thinking about building a new facility. The ability to create a new facility with the sole purpose to be a Data Center while taking advantage of their data center construction incentives, their IT equipment purchases, and related energy expenditures could mean getting a PUE (Power Usage Effectiveness) score as close to 1 as possible. Another extremely attractive state is Illinois, with its new class of incentives targeted at data centers. The bill would allow new projects to be exempt from sales tax on qualified equipment. To be able to qualify for Illinois’s tax incentives, a project must have a minimum of $250 million invested in its project and employ 20 full-time employees within a set five-year period. This can be seen as beneficial since the staff will need to be already included when managing and or building a data center, whether that be for maintenance or any other type of job inside the data center.

Virginia

In addition, Ashburn, Virginia, is a suitable hotspot for this competitive industry. Ashburn has been on many company's radars since the cost of electricity in the region is low. Tax cuts and incentives are also offered to data center operators in the area, which does not occur in New Jersey. Furthermore, Ashburn's proximity is critical to institutions in Washington DC. This area has estimated that upwards of 70% of the world's internet traffic is routed through data centers in the county, making it the most sought-after region in the US.

Location, sustainability, energy, and their relationship

Choosing the right location also ties with sustainability efforts. The right location can lower cooling costs by utilizing air-handling economizer units that can use outside air if the climate is cool. Both New Jersey and Virginia are viable options in this regard. Also, the right location can help reduce the energy cost since the expenditure depends on each area or state and energy firm. For example, Virginia and New Jersey have different electric companies. Atlantic City Electric, Jersey Central Power and Light (JCPL), Public Service Electric and Gas (PSEG), and Rockland Electric are the four electric utilities in New Jersey. Despite this, PSEG is the state's largest utility, providing about 70% of New Jersey's electrical consumers. According to Choose Energy, New Jersey has a supplier rather than a utility business, which implies an independent corporation that buys energy from utility companies and distributes or sells it to citizens or customers. As a result, people in New Jersey must purchase their power from a provider rather than the utility company, which raises the cost of energy compared to other states, such as Virginia.

Furthermore, New Jersey has a larger population than Virginia. There are approximately 8,882,371 people (about half the people of New York) in the state. In contrast, Virginia is provided by two electric companies, Dominion Energy Company and Northern Virginia Electric Cooperative. Dominion Energy Company is used by most of the population in Virginia. It is a regulated electric utility that transports and distributes electricity and natural gas from power facilities in Virginia and other states. In addition, according to Dominion Energy, the firm has offered an off-peak option since 2021 to provide customers with more control over their expenditures. As a result, their consumers can save money by switching to a more cost- effective energy source. For these reasons, energy in Virginia is becoming less expensive.

Furthermore, Virginia has a smaller population than New Jersey, with an estimated 8,590,563 residents. Therefore, the greater the people, the greater the energy consumption. Since energy consumption is a significant concern in data center firms, Google has built its data centers in less costly areas of electricity in the United States, such as South Carolina, Iowa, Georgia, Nevada, North Carolina, Alabama, Virginia, Oklahoma, Tennessee, Texas, Ohio, Nebraska, and Oregon.

DATA CENTER CLASSIFICATION

A data center cost refers to the cost of ownership in running a data center or colocation facility- including the property, buildings, servers, network equipment, power, cooling, and other infrastructures needs. Companies can evaluate the cost of a data center in tier rating. The tier reveals what a data center can offer regarding reliability and performance. This tier certification is issued by Uptime Institute, which is globally recognized for data center's reliability and overall performance. Not finding the right tier can lead to downtime issues and unessential expenses.

Tier 1

A tier 1 data center is not best suited for business needs. Its simple infrastructure can help save energy and maintenance costs for the user. Tier 1 Data centers are built with a single path for power and cooling; Companies should ensure that the facility has good physical security. The building should be free of excess humidity and not extreme weather that could harm the hardware. For data center tier 1, system redundancy and backup components are not required and have an expected uptime of 99.671% or no more than 28.8 hours of downtime annually.

Tier 2

Data centers with tier 2 do not have as many differences as the tier 1 data center. For example, it has a single path to power and cooling. However, it has redundancy components that can significantly impact when it comes to replacing or removing parts without interrupting the power supply. Data centers Tier II offers a better balance between cost-effectiveness and performance capability. It has an expected uptime performance of 99.741% and no more than 22 hours of downtime per year.

Tier 3

Data centers with tier 2 do not have as many differences as the tier 1 data center. For example, it has a single path to power and cooling. However, it has redundancy components that can significantly impact when it comes to replacing or removing parts without interrupting the power supply. Data centers Tier II offers a better balance between cost-effectiveness and performance capability. It has an expected uptime performance of 99.741% and no more than 22 hours of downtime per year.

Tier 4

This type of data center is considered fault-free tolerant, meaning that it can guarantee exceptional redundancy in cooling, power, and infrastructure. Data center tier 4 requirements are 99.995% uptime no more than 26.3 minutes of annual downtime. 2N+1 redundancy, such as two times the amount of power/infrastructure needed for operation, plus one backup and 96 hours (about 4 days) of outage protection. A tier 4 service is the most appropriate solution for enterprises that must host mission-critical servers.

P A G E 8

Table: A comparison of each of the tiers and their dif f erent advantages f or their clients.

Parameters

Tier 1

Tier 2

Tier 3

Tier 4

Uptime Guarantee

99.671%

99.741%

99.982%

99.995%

Downtime per year

< 28.8 hours

< 22 hours

<1.6 hours

<26.3 minutes

Component Redundancy

None

Partial power and cooling redundancy (partial N+1)

Full N + 1

Fault tolerant (2N or 2N +1)

Concurrently maintainable?

No

No

Partially

Yes

Cost per kW of redundant UPS capacity for IT*

$11,500

$12, 500-

$15,000

$ 23,000

$25,000

Compartmentalization

No

No

No

Yes

Staffing

None

I shift

1 + shift

24/07/365

Typical Customer

Small companies and start-ups with simple requirements

Companies with cloud storage servers

Growing and large businesses

Government entities and large enterprises

*Guidelines provided by Uptime Institute. COST ESTIMATE = (Total power capacity x Tier cost/kW) + (Computer room square footage x $300/square feet)

EFFICIENCY

Increasing Efficiency through Sustainability Efforts

Approximately 0.5% of US greenhouse gas emissions are attributed to data centers. As a result of the ongoing climate crisis, data center providers must adopt sustainable solutions moving forward. However, ensuring energy is used efficiently to power the facility is proving to be a challenge.

Implementing sustainability through green energy (solar, wind, nuclear) can better satisfy clients and CBRE's corporate responsibility efforts simultaneously. However, this must be done by acquiring power from reputable energy providers that utilize sustainable sources. Data centers obtain energy from energy distributors, who in turn get energy from energy providers. Independently sourcing and generating green energy is not feasible due to the steep starting costs necessary for such an enterprise (between

$6 billion and $9 billion for each 1,100 MW nuclear plant). Using any energy distributor that sources green or primarily green energy based on the location of each data center (see figure) can prove to be the most beneficial in terms of ROI.

Increasing Efficiency Internally

Having established that efficiency can be achieved externally, there is also the option of internally attaining that goal. Lowering the PUE internally has proven to be successful and cost-efficient for many data centers. While PUE can directly impact the cost of operating a data center, competitors and CBRE alike are always looking to lower this index; this cannot come at the price of the effectiveness and reliability of the data centers. CBRE prides itself on maintaining the highest standards for uptime and reliability. It is one of the priorities of the companies they work with and why they trust CBRE. Several approaches have been developed, tried, and refined in the past ten years.

Data Storage Management

While 30-40% of the total energy consumed goes to cooling the servers. Around 45- 55% goes to powering the servers themselves. Data storage management optimization offers real potential for benefits in this area. Data storage optimization comprehends the various processes, technologies, and frameworks that make the use and storage of data more efficient. If done poorly, data storage management can result in more servers. Or on the contrary, it can result in fewer servers being needed. That can mean up to a 5% impact on the overall savings potential.

For an existing data center, better data storage management can increase overall capabilities without the need for more real estate. This could mean more cost-friendly data centers in areas with pricy square footage.

P A G E 1 0

P A G E 1 1

Airflow Management

Another method is airflow management. This is the implementation of simple but effective techniques that as a result can offer significant savings. Taking advantage of natural convection to keep air temperature down, the aim is to prevent hot air recirculation. Specifically, this is achieved through the implementation of blanking

Source: ENERGYSTAR

panels, structured cabling systems, optimized vents tiles, and floor grommets, that way engineers can control the server room atmosphere. According to ENERGY STAR's data, up to 5% in energy costs can be saved for every 0.56-degree Celsius increase in server inlet temperature. In as little as one year, the payback on implementing these can mean approximately 20% in energy efficiency savings.

Increasing Efficiency through Cooling Management

Cooling management is the way engineers have found to efficiently cool the server room. This is done by Cooling the server room to the highest temperature of the server optimum functionality threshold, not cooling "empty space," higher efficiency cooling equipment, and choosing appropriate set points. All of these could help in diminishing the cooling cost of the facility.

Immersion Cooling

Immersion cooling is a notable option to assist data centers in solving the challenges they face in reducing costs while being more sustainable. It is a technique used to cool IT equipment. It consists of submerging the components in a thermally conductive and dielectric liquid. This cooling method has steadily grown over the years for distinct reasons. Firstly, it is more space-efficient than traditional cooling methods. By using fluid to cool the IT equipment, the need for fans, and HVAC systems are no longer necessary. Additionally, it helps lower power usage effectiveness, as significantly less power is used to cool the data center down. It is said to lower the server system's overall power consumption, by approximately 40% compared to air cooling systems.

Companies like Submer are partnering with compani

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