Atlanta risks falling behind rivals in luring data centers

Aerial photo of new expansion of Douglas County Google Data Center (foreground) and construction site of the new data center Switch (background) in Lithia Springs on Friday, January 17, 2020. (Hyosub Shin / Hyosub.Shin@ajc.com)
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Aerial photo of new expansion of Douglas County Google Data Center (foreground) and construction site of the new data center Switch (background) in Lithia Springs on Friday, January 17, 2020. (Hyosub Shin / Hyosub.Shin@ajc.com)

Area ranks 7th in U.S., but others growing faster

In a heavily wooded area of Douglas County, in the shadow of Six Flags’ roller coasters, two of the largest data centers in the state are rising from the ground.

Switch is building a server farm surrounded by high concrete walls and protected by armed security guards. Across the road, Google is expanding its server farm to more than 1 million square feet.

Data centers — rows and rows of computer equipment to power the internet — are popping up in and around Atlanta as online commerce and social media continue to skyrocket. From 2015 to 2019, the supply of data center space in metro Atlanta increased about 40%, according to commercial real estate services firm CBRE.

But the region is also struggling to keep pace amid intense competition. Atlanta ranked 7th nationally in terms of data center space as of June 2019. Among the top 10 cities or areas, though, Atlanta posted the second-slowest growth over the previous 12 months, CBRE estimated in a recent report.

A growing number of cities and states are trying to lure the next big project with lucrative incentives. Iowa recently gave Apple $213 million in tax incentives to build a data center near Des Moines, according to the Des Moines Register. Amazon selected Oregon last year for a new data center after the state gave it a 15-year break from paying property taxes, according to the trade publication Data Center Knowledge.

The recruitment battles are also playing out at a time when use of tax incentives for recruiting other industries has come under scrutiny here. A recent audit found that the economic benefit of Georgia's film industry tax credit has been exaggerated.

Caption
Construction site of the new Switch data center Switch in Lithia Springs on Friday, January 17, 2020. Switch, headquartered in Las Vegas, designs, builds and operates data centers. (Hyosub Shin / Hyosub.Shin@ajc.com)

Construction site of the new Switch data center Switch in Lithia Springs on Friday, January 17, 2020. Switch, headquartered in Las Vegas, designs, builds and operates data centers. (Hyosub Shin / Hyosub.Shin@ajc.com)
Caption
Construction site of the new Switch data center Switch in Lithia Springs on Friday, January 17, 2020. Switch, headquartered in Las Vegas, designs, builds and operates data centers. (Hyosub Shin / Hyosub.Shin@ajc.com)

Industry observers say Atlanta has drawn projects in part because of comparatively low electric power rates and cheap land costs. State officials also tried to address market competition in 2018 with a law to exempt sales and use taxes from the purchase of major equipment, provided a company invests a minimum amount in the development.

But incentives have drawbacks. Tax abatements offset some of the higher property and sales tax revenue generated from data centers.

Data centers are an even harder sell for the use of tax incentives, said Nathan Jensen, a professor of government at the University of Texas who has studied incentives.

“Data centers have very few positive impacts on the local economy,” Jensen said. “There are some construction jobs, but after that there are very few employees.”

Many data centers only create two or three dozen direct jobs — a far cry from new factories like the one being built in Jackson County by battery parts supplier Enchem, which is expected to create 300 jobs.

Still, economic developers in Georgia like data centers for several reasons. For one, they bring a high-tech cachet and the higher salaries that come with the industry. They can also help attract other technology companies, like software developers.

“We’re building a cluster of data centers here and we’re attracting tech talent to the area,” said Chris Pumphrey, executive director of the Douglas County economic development authority.

Additionally, server farms, compared to other industries, place little demand on roads, police and fire services, Pumphrey said.

Switch is investing $2.5 billion in the Douglas County facility and is expected to create 65 jobs, according to the state Department of Economic Development. Google invested $300 million in the first phase of its data center and created 25 jobs, although the company has not identified the investment amount for the expansion or the number of jobs created. County and state officials declined to provide figures on incentives for the Switch and Google data centers.

Growth in data centers is unlikely to slow any time soon as companies shift data to the cloud and collect more and more consumer data.

“All that data needs to be stored,” said Tim Huffman, an executive vice president with CBRE who specializes in data centers. “The whole world is an ongoing driver for the need for this kind of space.”

Northern Virginia was the top U.S. city or region as of June with 1,028 megawatts of data center space, nearly eight times more than Atlanta. Dallas and Silicon Valley ranked second and third, respectively, according to CBRE data.

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