Portland Area Among Cheapest Places in U.S. to Lease a Data Center, Study Finds

The report evaluates 23 markets across the U.S. based on cost per megawatt, and compares costs of electricity, climate, tax incentives, Internet connectivity and real estate costs.

by Mike Rogoway, The Oregonian (TNS) / November 18, 2014
Downtown Portland, Ore. Flickr/Thomas Hawk

Tax breaks coupled with low power costs and real estate prices make the Portland area among the cheapest metro areas in the nation to locate a data center, according to a new report from the commercial real estate brokerage CBRE.

The firm evaluated 23 markets across the United States based on cost per megawatt (data centers are huge electricity consumers because of the power required to run and cool their computers). CBRE compared costs of electricity, climate, tax incentives, Internet connectivity and real estate costs.

CBRE found the average rent is $1.9 million per year, the average power cost is nearly $800,000 annually (7.6 cents per kilowatt hour) and the average total tax payment is $1.9 million.

While CBRE didn't break out costs for each market, it ranked the Portland area in the top tier along with Atlanta, Colorado Springs, Dallas, Houston, northern Virginia, Salt Lake City and Seattle.

That's not a great surprise – Oregon has long been a destination for many big data-center operators, who have saved hundreds of millions of dollars due to state property-tax exemptions and the absence of an state sales tax.

Facebook and Google each built its first corporate data center in Oregon, and Apple and Amazon also have large facilities. Several commercial data-center operators have facilities in Hillsboro.

Server farms aren't typically big employers -- they may employ a few dozen to repair, upgrade and guard the computers -- but those who lease data centers say they can attract other information technology work.

A large data center can cost billions of dollars to equip, which can generate huge sales taxes and a hefty property-tax bill. But Oregon doesn't have a sales tax, and its "enterprise zone" tax breaks can save large data centers tens of millions of dollars annually.

The incentives are so great that when Fortune Data Centers (now Infomart) began marketing a new Hillsboro data center three years ago, the company boasted: "If power were free in California, it would still be cheaper to operate in Oregon."

Google is in the process of expanding its large data center in The Dalles, Apple continues building out its new facility in Prineville and T5 Data Centers began construction of its long-planned Hillsboro data center last summer. But no new companies have announced large Oregon data centers in more than two years.

That may be about to change, according to Ajay Malhotra, a vice president for technology in CBRE's Portland office. He said the firm has had a half-dozen "serious" inquiries in recent months.

With appetite for leased data center space growing -- CBRE says market inventory increased more than 30 percent between June 2013 and June 2014 -- data center builders are again turning their attention to Oregon.

"I do sense the interest is rising," Malhotra said.

©2014 The Oregonian (Portland, Ore.)