Is it possible that the ever-increasing demand for data center space could be the cure for vacant commercial real estate plaguing cities? Whether or not they meet a purist definition of urban decay, vacant commercial buildings certainly are eyesores and economic drains on their surrounding areas. And the problem appears to be growing nationwide; Harvard Professor of Law and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau Elizabeth Warren calls it a crisis. In some cities, however, data center operators are buying up vacant real estate to house new operations and helping revitalize those areas as a result. If carried out on a national basis, this trend seems like it could have significantly positive economic effects.
A New York Times article yesterday morning detailed the situation in St. Louis, where businesses have been steadily leaving their downtown digs for new buildings in nearby suburbs. The result has been a glut of old office buildings and warehouses that just couldn’t find tenants; the Times article cites a vacancy rate of more than 22 percent. Recently, however, there has been something of a data-center-led-revitalization, as data center operators, including Unisys and Digital Realty Trust, lured by cheap property and cheap power, have built new locations in downtown St. Louis. New data centers mean hundreds to thousands of new jobs and, one would expect, an increase in nearby retail and other services to serve an influx of workers where previously there have been few.
This morning, Data Center Knowledge reported on another brownfield development, this one by Amazon in Dublin. Looking to expand its ability to serve European customers — its existing Dublin Availability Zone has proven wildly popular — Amazon is converting a former Tesco supermarket warehouse into an Amazon Web Services data center. A related trend is taking place in San Francisco, too, where fast-growing technology companies are snatching up large tracts of vacant office space downtown, helping to drive vacancy rates down to 12-15 percent from the 2009 rate of 18-20 percent.
With cloud computing, social media and a general desire by companies to save money on IT driving demand for data center space, there appears to be a prime opportunity for data center operators to serve their own needs and those of economically depressed areas by moving into vacant buildings. In Las Vegas, my city of residence, the unemployment rate is at a whopping 14.9 percent, and the landscape is littered with abandoned supermarket and department store sites. Where those stores anchored shopping centers, the neighboring businesses are moving out or going out of business. We have a 24-hour workforce, limitless solar energy and an economy desperately in need of diversification — why not convert some of our large abandoned space into data center sites? It can’t all bad for data centers here, as evidenced by Switch Communications’ plan to supersize the campus for its Las Vegas-based SuperNAP data center. Of course, I’m just being selfish; there are plenty of other cities with more vacant offices and industrial parks than they’ll likely be able to fill any time soon.
Data centers aren’t a fix-all for vacant real estate, of course, and they certainly aren’t a panacea for unemployment, but they do have promise as a mitigating force. If local governments are willing to incentivize companies willing to develop these vacant sites – via tax breaks and rezoning, among other measures — and if those companies are willing to retrofit existing properties instead of building from the ground up throughout North Carolina and the Pacific Northwest, it could be a win-win situation. Data center operators get relatively inexpensive sites with plenty of available personnel, and cities get businesses that aren’t going away any time soon to fill their vacant lots.
Image courtesy of Wikipedia Commons contributor Loranchet.
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