Five Reasons for Minneapolis' Data Center Market Growth

07/08/2015

The Minneapolis data center market has been increasingly active, providing additional options for data center users. The steady flow of data center providers into Minneapolis is no accident, given its centralized location and low risk of natural disasters. In fact, Minneapolis made it into the top five of datacenterHawk's most searched Q2 markets of 2015. Our analysis points to five key reasons for the Minneapolis market boost:

  1. Active Colocation Market – Over the past 24 months, the Minneapolis colocation market has been on an upswing. "Minneapolis is a key market for us," says Robert Fulford, Vice President at Stream Data Centers, "and the activity we are experiencing now from data center users is encouraging." Stream is one of several national colocation providers that delivered multi-tenant data centers during this time, creating an increased number of credible options for data center users. These Minneapolis data centers, and services offered by operators, attracted local users that would have previously built internally or gone to other markets within close proximity. Below is a sample of regional activity:
    • CenturyLink – Their new data center in Shakopee, MN , was built by Compass Data Centers. Phase 1 opened in 2014 with 1.2 MW commissioned and 13,000 RFSF (raised floor square feet). Construction has begun on the next phase of this data center
    • Data Bank – Data Bank delivered their Uptime Institute Tier III-constructed data center in Q2 of 2015. The Eagen, MN facility delivered 10,000 RFSF with 1 MW, and can provide between 100-200 Watts/SF. At full build, the site will have 50,000 RFSF
    • DCI Technology – A data center provider with several US holdings, DCI bought the 541,000 SF former American Express building/data center in Q1 2015 and are in the process of converting it to a multi-tenant data center
    • Stream Data Centers – Stream delivered their 76,675 SF building in 2014 and has been successful in leasing one of its three data halls (1.2 MW/10,000 RFSF). Each data hall provides autonomous infrastructure and up to 2.4 MW of critical load
    • ViaWest – Delivered approximately 37,000 RFSF of data center space at 120 Watts/SF and offers users a selection of enterprise-focused managed/cloud services
    • Other providers active in Minneapolis: Cologix, Iron Gate, and OneNeck IT Solutions

  2. Reasonable Power Costs – Compared to similar markets across the United States, Minneapolis' electricity rates are reasonable. Commercial electricity in Minnesota costs 20% lower than the national average and data centers never pay sales tax on electricity, which also lowers the cost. Additional cost savings are available to colocation providers in the economic development contracts between local electric providers and municipalities.

  3. Aggressive Tax Incentives – In Q3 2013, Minnesota passed tax legislation spurring data center development activity in the state. "We offer the best [tax] incentives for data centers," says Gene Goddard, Director of Business Investment for Greater MSP, a local non-profit economic development organization. Goddard, who helped write Minnesota's tax incentive legislation, notes that Minneapolis' incentives are unique because customers leasing space inside data centers also receive these twenty-year tax breaks. Minnesota rewards developers investing $30 million in the initial four years of opening large (25,000 SF or more) data centers. A qualifying data center built in Minneapolis would receive tax rebates plus no sales tax on hardware, software, and electricity for twenty years.

  4. Fortune 1000 Companies – Minneapolis is home to many Fortune 1000 companies, including 3M, Best Buy, and UnitedHealth Group. These companies and industries typically have larger data center requirements, and the Minneapolis data center market now provides a compelling reason to house a company's IT infrastructure in the region.

  5. Abundant Free Cooling – Data center users in Minneapolis can benefit from the region's cool weather because it lessens their dependency on air conditioning —which lowers their operational costs. As per a study by construction services consultants DLR Group, approximately 315 days per year of "free cooling" are available to data centers in Minneapolis.

When asked which of those reasons is the most important for the increase in local activity, Goddard says: "It's all of those things combined that bring data centers here. The large providers who could afford to build anywhere chose to come here. They know Minneapolis is where they can prosper." Because of the factors above, prospering is something the Minneapolis data center market will continue to do.

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