SunGard: Real Estate Weakness Equals MSP Strength

A declining real estate market generally qualifies as bad news. But perhaps not for MSPs looking to expand. SunGard Availability Services is readying a data center for a May 2010 opening in the Sacramento, California area. Here’s the strategy. I wonder: Are rival MSPs considering similar moves?

SunGard, which offers managed services and colocation among other services, will use the new center to pursue business in the Bay Area, some 90 miles southwest. Sacramento has been particularly hard hit by the recession, but the decline in commercial real estate values and increase in commercial vacancies provide an opportunity for companies looking to grow in the region.

Lower real estate costs offered a leg up for SunGard Availability Services. The company “avoided having to build out a new data center due to real estate being available that made sense from a financial perspective,” said Rahul Bakshi, vice president of Managed Services Strategy & Solution Design at SunGard Availability Services.

He noted that the data center also possessed the appropriate level of quality — with some additional investment to upgrade the facility.

The Sacramento Business Review reported that industrial real estate vacancies exceeded 12 percent in 2009, with average asking lease rates falling to early 2006 levels. SunGard Availability Services’ data center is located in an area of Sacramento County — Rancho Cordova — that experienced one of the biggest drops in occupancy. The Sacramento Business Review put the loss in occupancy for Rancho Cordova at -684,671 sf.

Bakshi said the Bay Area target market is showing strong demand for colocation and managed services. He said the San Francisco area tends to recover at a more aggressive pace than other markets, the dot.com bust being a notable exception. Software-as-as-Service vendors seeking hosting services provide one source of business in the region, he noted. He also pointed to companies in the healthcare and financial services fields as also showing interest.