Cloud Computing’s Effect on Real Estate, Part 1: The Spatial Realities of Less Physical Storage

Cloud Computing’s Effect on Real Estate
Part 1 of 2

Cloud computing in the real estate context provides benefits to users and owners as well as savings which include lower power bills and better use of valuable building space. While Cloud Computing can make sound business sense, companies and counsel should be mindful that Cloud Computing presents various legal issues around control and custody of data, data preservation and collection, data review and production, and, of course, attorney-client privilege. Moreover, Cloud Computing may also result in a significant reduction in the size of the real estate “foot print” of companies utilizing this technology.

Cloud Computing minimizes the storage area traditionally used by companies to house its files, data, and records. Space efficiencies will be realized once the data is being stored remotely. However, the growing popularity of Cloud Computing vis-à-vis the actual physical space used to store paper documents begs the question: “What will companies do with, presumably, the glut of space that will now be available to them?”

Most, if not all, companies maintain on-site storage space for its paper records. However, the ever constant development of technology has been slowly chipping away at the need for on-site storage space. For instance, most documents are now transferred via email or stored on computer hard drives, essentially doing away with the need to keep an actual “hard” file. In many cases, companies store their paper documents off-site in large warehouse space controlled by document management vendors. These warehouse facilities will also one day face possible extinction as companies will no longer utilize this space as a result of Cloud Computing. In these tough economic times, companies continue to closely monitor their expenses, and off-site storage tends to be a costly one, especially for larger companies with more specific needs. Depending on the vendor used for Cloud Computing, the costs are a mere fraction of those incurred through off-site leasing of storage space.

Additionally, Cloud Computing should reduce the need for space to store hardware devices too. Essentially, the remote storing of data will do away with the use of large data servers, or the need to have several large data servers in use at the same time, that occupy large areas of space that companies dedicate to their data storage centers.

If a company is in the market for space, it is imperative that the real estate professionals charged with the assignment take into consideration whether the company is using Cloud technology, because that will have a direct impact on the amount of space that needs to be allocated for storage. Companies utilizing Cloud technology will have little use for configuring into its real estate plans considerable space for its storage needs, which will undoubtedly reduce the transaction costs it will incur (e.g., rent, brokerage fee, etc.)

* This is the first part in a two-part series which comprise an abridged version of the article “The Shrinking Effects of Cloud Computing on Real Estate,” written by Daniel Garrie and Edwin Manchuca published in the Los Angeles Daily Journal.