Chicago was the third-busiest market for data center activity in 2016, thanks to Microsoft, Oracle and a host of financial firms absorbing large amounts of space across the city, according to the latest research from JLL. JLL reported that the Chicago data center market absorbed 56 megawatts last year. That’s a big number – JLL measures data center absorption in megawatts, not square footage – behind only to the Northern Virginia and Northern California markets and just ahead of Dallas-Fort Worth and the Pacific Northwest. It was a record year for Chicago from an absorption standpoint.
Data center are required to run uninterrupted 24 hours per day, 365 days per year, unlike any other property type, so it is no surprise that owners are actively investing energy-efficient features and green building techniques to reduce energy consumption. Anything that reduces costs goes straight to the bottom line for data centers, says David Rinard, senior director of global sustainability at Equinix. So Equinix uses a variety of strategies such as building tighter buildings, changing the operating temperature and using smarter control systems for lights and air conditioning to retain their competitive edge from a pricing perspective. “LEED-certified buildings are top-of-mind for customers and help attract and retain tenants as well as drive down costs,” according to Aaron Binkley, director of sustainability at Digital Realty Trust.
Real estate investment trusts specializing in data centers are reaping the benefits of our growing internet addiction. Worldwide, Internet traffic this year is expected to surpass a zettabyte (or 250 billion DVDs’ worth) of information, according to networking equipment company Cisco. The company expects current traffic to double by 2019. Because all of that Internet activity relies on the cloud (servers located in data centers), real estate companies that house, power and cool data centers are seeing tremendous growth.
After going through one of the toughest recessions in its history, Northern Nevada’s commercial real estate market suffered greatly as rising vacancies crushed new construction activity and speculative building. The region’s commercial real estate sector is in the midst of a comeback, however, thanks to several economic development victories over the past few years causing a rising tide effect. Major projects, such as the Tesla Motors Gigafactory, Switch Supernap Tahoe Reno Industrial Campus and Rackspace Data Center, helped legitimize Reno as a viable area for industry and technology, said Ted Stoever, vice president of land and investment for Colliers International’s Reno office. Ultimately, these projects are driving job creation opportunities and all the ancillary businesses that go with that.
Today the Michigan House Tax Policy committee advanced legislation that would provide large tax breaks to cloud-computing data center companies. The tax exemptions were requested by Nevada-based company Switch, who announced it will convert the former Steelcase pyramid into a data center that will result in a $5 billion investment and 1,000 new jobs over the next 10 years if the series of bills are approved. Three competing bill packages have been introduced in the House and Senate, and each would exempt "data centers" from sales, use and personal property taxes. It also would exempt "co-located businesses," or clients of the data centers, from those taxes. Some of Switch's clients include companies like Amazon, eBay and Intel.
Dallas, Texas-based Compass Datacenters has acquired 23.5 acres in Lithia Springs, Ga. where it plans to develop four-to-five 1.2 MW data centers in six months. Compass identified Atlanta as a “fast-growing” data center market, and the site has robust power infrastructure fed by three power substations in the area, multiple power feeds onto the land and redundancy built into the power grid, the data center developer said in a statement. "Our customers have identified these markets as locations where they want to work with Compass to build dedicated data center facilities, and these newly-acquired land parcels are ideal sites because of their access to network and utility infrastructure, proximity to their operations, minimal risk factors and more,” Compass Senior Vice President Chris Curtis noted in the statement.
In April, both Missouri (Senate Bill 149) and North Dakota (House Bill 1089) enacted legislation creating sales and use tax exemptions for new and expanding data storage centers. According to CPA Practice Advisor, Missouri S.B. 149 provides several state and local sales and use tax exemption for machinery, equipment, computers, electrical energy, gas, water, and other utilities, including telecommunication and Internet services, for new or expanding data centers. Purchases of tangible personal property for the construction of a new data storage center facility are also exempt. North Dakota HB 1089 provides a sales and use tax exemption for enterprise information technology equipment and computer software purchased for use by a qualifying business in a qualified data center. The exemption is also available to existing data centers that have undergone substantial refurbishment, with at least 16,000 square feet improved through methods including energy efficiency improvements, building improvements, and the installation of enterprise information technology equipment, environmental controls, and computer software.
Gov. Kate Brown signed Senate Bill 611 last week, ending the controversial “central assessment” tax of data centers that created years of legal uncertainty for tech companies in Oregon and threatened future growth of the industry in the state. The legislation spiked global interest, as it hopes to trigger a data center boom and attract tech giants such as Amazon, Facebook and Apple to rural Oregon by changing rules for assessing property taxes on telecommunications infrastructure by exempting data centers coveted by local governments for their heavy utility fees. The bill also caps taxes that can be levied on cable TV companies, including Comcast. However, a gaffe in the bill's language has lawmakers pursuing a fix they hope will will attract Google Fiber to the Portland area.
In an effort to make Nevada more competitive with neighboring states, Senate and Assembly members held a joint committee hearing on SB93 and AB161, which would expand tax abatements to the aviation industry. The bills have bipartisan support, as the abatements would would quickly create hundreds of good-paying jobs and would bring Nevada in competition with 45 other states that offer abatements or exemptions. During the hearing, industry representatives said aviation companies have avoided doing repairs, expanding their business or headquartering their planes in Nevada because adjacent states offer better incentives.
By Theodore F. Bayer, Senior Managing Consultant / Principal, San Francisco