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Texas Lures Data Centers, Not for Jobs but for Revenue

Apr 24, 2016

FORT WORTH — The
billionaire developer Ross Perot Jr. describes data centers as the modern
equivalent of America’s giant factories in the early 20th century. And here in
the sprawling Dallas-Fort Worth region, they seem to be spreading as fast as
springtime wildflowers.

 
 A showroom prototype of a customizable customer pod containing servers at Aligned Data Centers in Plano, Tex. The company has a program that lets clients pay only for the power they use, as opposed to paying an upfront rate.

 

At AllianceTexas,
Mr. Perot’s 18,000-acre multiuse project in northern Fort Worth, Facebook is
building what it says will be a premier data center with an investment expected
to reach $1 billion. About
50 miles east, the Dallas suburb of Richardson is home to 20 data centers, and
expects at least four more over the next 18 to 24 months. In neighboring
Garland, RagingWire Data Centers, based in Sacramento, is
in the first phase of construction on a planned million-square-foot complex.

 

Texas has become
one of the country’s leading destinations for data centers, propelled by robust
economic growth in recent years, a business-friendly tax climate, abundant
sources of water and dependable electricity.

 

Dallas-Fort Worth,
the nation’s fourth-most-populous metropolitan region, ranks among the nation’s
top five data center locations. In square footage for multitenant data centers,
it ranks fourth, with 2.8 million square feet, according to 451 Research, a firm based in New York that
analyzes information technology trends.

 

Suburban Northern
Virginia, near Washington, is widely considered the nation’s top data center
market, and others high on the list include the greater New York-New Jersey region and the Silicon Valley-San
Francisco area.

 

So far impervious
to the boom-bust cycles in residential real estate, data centers have been a
reliable bright spot, and analysts call for continued expansion in the
foreseeable future, both in the United States and in developing markets like
Latin America.

 

“In the grand
scheme of real estate, data centers are still a huge business,” said Todd
Bateman of the CBRE Group, a commercial real estate services
company.

 

As long as people
are tethered to computers, the Internet and smartphones, there will be an
insatiable need for data centers.

 

The data center
market across North America had “tremendous growth” in 2015, according to a
report by JLL, a global
real estate services firm. Multitenant data centers in the United States earned
$115.3 billion in revenue last year, a 6.1 percent increase from 2014.

 

Bryan B. Marsh III, vice president of
portfolio management, at Digital Realty’s data center in Richardson, Tex.
Credit Brandon Thibodeaux for The New York Times

 

The boom seems to
be playing out under the radar of the public, in part because data centers
prefer to keep a low profile, largely for security reasons. Average citizens
are most likely unaware that the large, windowless buildings they pass on their
morning commutes might be data centers housing equipment to facilitate their
computer-reliant lives.

 

“The general
public today probably doesn’t realize how they tap and touch and utilize the
data center all throughout their day,” said Bo Bond, a leader of JLL’s data
center solutions team.

 

State and local
leaders across the country have increasingly made data centers a target of
their community development strategies, often by offering tax incentives and
other inducements. While data centers, with relatively small staffs, are not a
big source of jobs, they contain millions of dollars of components that provide
a lucrative source of tax revenue, even with abatements.

 

Large enterprises
like Facebook often maintain their own centers, but many companies are shedding
that costly and complex function to concentrate on their core business, giving
rise to a continuing increase in multitenant centers that offer security and
expertise to a range of clients.

 

Across the 13
counties in the Dallas-Fort Worth region, the governor’s office says, there are
at least 200 enterprise and multitenant data centers.

 

Richardson, Tex., whose registered trademark is Telecom
Corridor, was one of the state’s first municipalities to actively pursue data
centers, said John Jacobs, executive vice president of the city’s chamber of
commerce.

“Each one of these data centers is a little gold mine
cranking out wealth for the city,” he said.

Its largest is Digital Realty,
which sits on a 69-acre campus that was once occupied by Collins Radio, a
military contractor in the early days of aerospace. Fortified by an eight-foot
spiked fence, Digital Dallas, as it is known locally, is a corporate flagship
with eight buildings. Four serve multiple tenants; the others each serve large
single tenants. The still-growing complex will ultimately encompass 10 or 11
buildings and total more than 1.1 million square feet, said Bryan Marsh III, a
vice president and portfolio manager for Digital Realty.

 

In Plano, one of
the area’s growing data center markets, Aligned Data Centers, a division of Aligned
Energy, has opened a center that offers a “pay-as-you-go” program in power
usage. It enables clients to sharply curtail power costs by paying only for
power they use, instead of locking into costly arrangements upfront, said
Aligned Energy’s chief executive, Jakob Carnemark.

 
 
Bryan B. Marsh III, vice president of portfolio management, at Digital Realty’s data center in Richardson, Tex 

Digital Realty’s data center in
Richardson, Tex. Companies like Aligned, Alliance Texas and Digital Realty are
finding a booming market in the Dallas-Fort Worth area.

While much of the
data center development in North Texas has been clustered in the Dallas
corridor, government and business leaders on the western side of the
metropolitan region have been waging an aggressive effort to lure more data
centers toward Fort Worth and its surrounding communities.

 

At AllianceTexas,
data centers have added another dimension to the development that Mr. Perot,
the son of the computer magnate H. Ross Perot,
started assembling more than 30 years ago in wheat fields and ranch land about
15 miles from downtown Fort Worth.

 

Developed by Hillwood, a company founded by the younger Mr.
Perot, Alliance encompasses an airport, houses more than 425 companies and has
a bustling town center and upscale homes. Facebook’s will be its fifth, and by
far largest, data center.

 

Mr. Perot, 57,
said the growth of data centers at Alliance struck a nostalgic chord, recalling
how, as a boy, he used to collect old punch cards when his father was running
Electronic Data Systems in the 1960s. “I’m one of the few kids that grew up in
data centers,” he said.

 

Now under
construction, the Facebook center will consist of three 250,000-square-foot
buildings. Work on the first facility is expected to be complete in June.
Facebook’s chief executive, Mark Zuckerberg, said in a Facebook post
that the complex would be “one of the most advanced and energy-efficient data
centers in the world.”

 

Fort Worth leaders
landed the Facebook deal after a 220-city competition that stretched for more
than a year. Fort Worth and Tarrant County provided a total of $146.7 million
in tax abatements for up to 20 years. During that time, the city, county and an
area school district will receive a total of $228.5 million in additional
property taxes, the Fort Worth Chamber of Commerce said.

 

The center will
draw power from a 202-megawatt wind farm that the company is helping to build
about 100 miles northwest of Fort Worth. That move plays into a trend in the
industry to be more sensitive to environmental concerns since the centers draw
tremendous amounts of electricity.

 

To appeal to
Facebook, local officials promoted the availability of wind energy,
a strong labor pool in technology and access to airports. And in addition to
tax incentives, they pointed out a Texas law that spares larger data centers
from sales taxes on equipment.

 

Fort Worth’s
mayor, Betsy Price, who was heavily involved in the Facebook talks, said city
leaders across the region were scrambling to lure more data centers because
they offer well-paying jobs, attract other high-tech enterprises and do not
require a large investment on infrastructure.

 

“We love those
guys,” she said.

 
 
New York Times | Dave Montgomery  
To read the original article, click here. 

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