Server Rooms and IT Closets: What to Put in the Lease

Most offices have at least one network room. The terms get used loosely, so it helps to separate them.

• An IT closet, often called an IDF (intermediate distribution frame), holds the switches and patch panels that connect the desks on part of a floor. Larger suites have several.
• A main network room, or MDF (main distribution frame), is where carrier circuits arrive and the core network equipment sits.
• A server room holds computing and storage equipment in racks, in addition to network gear. It has the heaviest power, cooling and security needs of the three.

A landlord sees a server room as a concentration of risk in a building designed for desks: more electrical load, heat that runs all night, heavy racks, water-based cooling above another tenant’s ceiling, and modifications to fire protection. None of this is unusual, and most landlords approve it. They approve it on conditions, and those conditions are what you negotiate.

If what you have in mind is larger than a room, such as dense racks of GPU servers for training, the better answer is usually a colocation facility or cloud provider. An office server room suits development hardware, sensitive data that must stay on premises, and network equipment.

Where the room goes affects cost, risk and how hard the landlord’s review will be. Decide it with your architect, engineer and IT lead during the test fit, before the lease is signed if the room is important to you.

• ✓Is the location away from plumbing, including restrooms, kitchens and mechanical rooms on the floor above?
• ✓Is it an interior room without windows, for both temperature stability and security?
• ✓Is it close to the building’s telecom riser and electrical closet, to shorten cable and feeder runs?
• ✓Can cooling equipment reach it, with a route for piping and a place for condensate to drain?
• ✓Has a structural engineer confirmed the floor can carry the planned racks and batteries in that spot?
• ✓Can equipment be moved in and out through the freight elevator, corridors and door openings?
• ✓Is there room for the equipment to grow, or an adjacent room that could be taken over later?
• ✓Will noise from the room disturb neighboring desks or an adjoining tenant?

Small closets deserve the same thought in miniature. A network closet with no ventilation and a door that stays shut will overheat ordinary switches. Ask your engineer whether each closet needs its own cooling or ventilation instead of assuming the office air will handle it.

Three building systems meet in this room. Each has its own guide in this resource center, so this section covers only what is specific to the room.

• Power. The room usually gets its own panel and dedicated circuits, sized by your electrical engineer. The lease should state the capacity committed to your premises and your right to add circuits. If the room will be on a UPS or generator, those rights need to be in the lease as well.
• Cooling. Equipment that runs continuously needs a dedicated unit that does not depend on building hours. That requires a right to install it, a way to reject heat such as condenser water or a rooftop condenser, and stated charges for whatever the building supplies.
• Fire protection. Standard office space is protected by water sprinklers. Some tenants want a different approach in an equipment room, such as a system that reduces the chance of accidental water discharge or a gas-based system. Any change needs the landlord’s approval, a fire protection engineer, permits and coordination with the building’s alarm system, and codes limit what is allowed.

Fire protection is the item most often left until construction, and the one most likely to stall a permit. Raise it when plans are first drawn. Ask the landlord what the building permits, who its required fire alarm contractor is, and whether the landlord will want a non-standard system removed at the end of the term.

Ask the landlord’s engineer to review the server room concept before the lease is signed. An objection at that stage is a negotiation. The same objection during construction is a delay.

Leases give the landlord broad rights to enter the premises to inspect, repair, clean and show the space. For most of the office that is fine. For a room that holds customer data or proprietary models, it conflicts with what your security policy and your customers’ contracts may require.

• Designate the room in the lease as a secured area, and attach a plan showing it.
• Provide that the landlord and its contractors may enter the secured area only with advance notice and accompanied by your representative, except in an emergency.
• Exclude the secured area from janitorial service unless you request it.
• Allow your own lock or access control on the door. Buildings and fire departments often require emergency access, which can be handled with a sealed key or lock box arrangement that shows if it has been used.
• Ask that the landlord tell you promptly after any emergency entry.
• Check for building equipment inside or above the room, such as valves or shared risers, that would give building staff a routine reason to enter. If there is any, pick a different location.

A server room changes the risk picture for both parties, and the lease allocates it whether or not anyone discusses it.

Water is the main concern. A leak from your cooling unit can damage the tenant below, and a leak from the tenant above can destroy your equipment. Leases typically make each party insure its own property and may limit the landlord’s liability for damage to yours, including from building systems. Read those sections with your attorney and your insurance broker before you decide how much equipment to keep on site.

• ✓Does our property insurance cover the equipment in the room at its replacement value, including water damage?
• ✓Does the lease include mutual waivers of claims covered by property insurance, and do our policies permit them?
• ✓Are we responsible for damage our cooling unit or other installations cause to the building or other tenants, and is that insured?
• ✓Does the landlord require additional coverage or higher limits because of the room?
• ✓Does our policy address loss of data or business interruption from a building service failure?
• ✓Are batteries or other stored energy in the room disclosed to our insurer and to the landlord?

These are questions for your insurance broker and attorney. The point for a founder is to ask them before the equipment arrives.

A server room is an alteration, and leases require landlord consent for alterations that affect building systems or structure. The work letter governs the initial build-out. The alterations clause governs anything you add later. Both should make room for this.

1. Show the server room and closets on the plan attached to the letter of intent or lease, so the landlord has approved the concept.
2. Confirm in the work letter that mechanical, electrical and fire protection work for the room are eligible for the tenant improvement allowance.
3. Have your engineers prepare the technical drawings and submit them for landlord review early.
4. When the landlord approves the drawings, ask in writing which elements, if any, must be removed at the end of the term.
5. Negotiate the right to leave cooling units, panels and cabling in place where they are in working order.
6. Add a right to modify or expand the room during the term, with consent not unreasonably withheld.
7. Keep the approvals, as-built drawings and maintenance records in the lease file.

Removal can be expensive for a room like this: racks, dedicated panels, cooling piping, roof equipment and any special fire system, followed by repairs. The landlord’s incentive to waive removal is strongest before you sign and when the installation is something a future tenant could use.

Tenant Advisory Group represents tenants and buyers, and for technology companies we bring the server room into the proposal and test fit stage, working alongside the client’s architect, engineers and attorney so that the room is approved, funded and documented before construction starts.