Datacenters: Developer's Recession Proof Economic Engine?
For several years states have competed to attract the development of datacenters with tax incentives, developers have reshaped their building portfolio mix to include building them, and local communities have challenged their elected leaders to prove just how many jobs the datacenters will provide the local economy in exchange for reduced taxes.
While the debate continues, commercial interests with significant electronic information storage needs can't help but embrace the move toward data storage centers. Numerous companies have for years flocked to central Washington to build datacenters, including Microsoft, Yahoo, Ask.com, Intuit and Sabey Corporation. Traditional commercial developers like Sabey Corporation have been in the datacenter market for a while now, recently announcing a $100+ million datacenter project.
With Washington's Governor Gregoire predicting that over 50% of government agency's IT data needs will be outsourced in the near future (i.e. government agencies will get out of the often costly and redundant server/information storage business), can one reasonably say that datacenters are a recession proof building typology for developers? The answer is probably no, at least until the development and operational costs of datacenters cease to be inextricably tied to state tax incentives. That's the experience in Washington. Many of the datacenter projects mentioned above are now on hold, because state lawmakers could not agree on tax incentive legislation.
As those projects have been developed, the competition to keep them has also been fierce. Take for example, Washington's own Microsoft, which well be the proverbial Canary in the mine, given it's reported consideration of moving a 470,000 square foot datacenter in Quincy, Washington to Texas for cheaper electricity and better tax incentives.
Passive observers of the technological age can't help but wonder with Google digitizing libraries whether the community library is soon to be a thing of the past, with datacenters the reality of the future. Bottom line: keep you eyes on datacenters as recession proof economic engines! Buildings to store information in the age of cloud computing may lease up quicker than your traditional speculative Class A office building. If the development agreements are structured to fairly allocate risk, when and if the lessee defaults, the developer may well find themselves managing and operating a datacenter at a fraction of the original cost.
