By: Andy Cvengros, Vice President, JLL
The pressure is on for data center operators, as client organizations raise their demands for broader reach, more support and new services, all while controlling cost. In response, the major data center providers are expanding their geographic footprints, and gobbling up smaller providers along the way. Location—including energy costs, available product and tax benefits—will increasingly give data center operators a competitive edge.
Multi-tenant data center providers in particular experienced 6.1 percent growth and revenues of $115.3 billion in the past year. Drivers include the growing popularity of cloud services and the exodus of the major telecommunications companies, from the data center services sector as they return to their core competencies.
JLL’s Data Center Perspective evaluates emerging trends in the data center industry, analyzes top markets for data centers and identifies factors that what make certain data center hotspots so attractive.
Three key elements are attracting data center operations:
- Cost and availability of energy, including renewable energy options. Dallas and northern Virginia are increasingly attractive because these are two of the most affordable U.S. utility markets. Energy averages roughly 5 cents-per-KwH in these areas—signficantly lower than the 7.4 cents-per-KwH national average. The abundance of renewable energy available in Reno is attracting major technology companies that have expressed a growing interest in energy efficiency and renewable energy.
- Tax benefits. To encourage data center relocation, many states in 2015 provided investment tax incentives to encourage data center construction activity and job creation. An Associated Press (AP) analysis of state revenue and economic-development records shows that government officials extended nearly $1.5 billion in tax incentives to hundreds of data-center projects nationwide during the past decade. Portland, Phoenix and Minneapolis have tax incentives that are tailored specificaly to attract data centers.
- Proximity to companies seeking data center space. Large metropolitan areas are still seeing the majority of data center leasing activity. For instance, the financial services industry and the federal government require extensive data center capabilities, and those willing to pay a premium for the lowest possible transmission latency have been drawn to the elite markets. Locations in Northern New Jersey, Northern Virginia, Toronto and Greater Chicago all continue to maintain their status as top data center locations through continued investment.