Fiber, Tax Incentives, 5G & New Investors | Takeaways from Mike Lash’s State of the Market in Atlanta
ATLANTA, GA – CAPRE’s Fourth Annual Greater Atlanta Data Center & Cloud Infrastructure Summit kicked off with a keynote presentation titled “State of the Greater Atlanta Data Center Market,” by Mike Lash, Senior Associate at CBRE Data Center Solutions, a firm which manages 80 Million square feet of raised floor space within enterprise, colocation and hyperscale data centers.
In this keynote, Lash offered a lay of the land of the data center industry locally to Atlanta to illustrate that data centers aren‘t going anywhere, but who owns them and how they’re being constructed is changing. After some remarks about the national data center industry as well as the the scene more local to Atlanta, Lash offered some big-picture takeaways from his presentation — highlighted below.
Drivers to Atlanta
“Let’s talk about the drivers to Atlanta. Why is Atlanta so amazing? Why is this tiny little town a primary data center market?” asked Lash. “Well, it has a lot to do with the terminus. All of the fiber does end here. We have major dark fiber backbones that support a lot of the providers. But also, there are other things. The cost of power, for example. Now, cost of power is confusing, because you have to hit certain thresholds…but just looking at market prices, we’re at the bottom of the rung. There are providers today that are enjoying three and a half-cent per kilowatt hour, or even below. They’re enjoying sub-three cent per kilowatt hour, just depending on their usage and their flexibility as to when they use that power.”
Next, Lash moved onto tax incentives. “We have finally gotten to the point where our tax incentives matched the tax incentives of Northern Virginia and Dallas and a few of the other tax incentivized markets,” he remarked. “And it’s a little bit of a confusing, since it’s a tax code, but the bottom line is that for Georgia’s 7% Sales-and-Use Tax, you get 100% exemption on that if you hit the spend threshold and if you hire twenty people.”
Lash conceded that 20 hires, in the data center business, can be a stretch. “But if you meet it, you can enjoy that 100% tax exemption. And that’s on your building, that’s on the kit inside your building, and within the grey area, you can count some of your managed services and fiber that are also connected to that building,” he beamed. “So it’s an amazing tax incentive, and it’s the reason why companies like Switch and CyrusOne want to be in Atlanta.”
The Advent of 5G
“5g is going to change everything,” predicted Lash. “Not so much cell phone-5G, which is more about branding than anything, but more-so about the data center side — how you connect data centers and these smaller Edge sites. That’s where 5G technology is really going to come into play. And it really comes down to small cell. There’s not enough of a spectrum right now for self-driving cars or to really track anything in terms of small devices. So companies like Crown Castle, American Tower that are getting into the data center business — and VaporIO’s options as well – seem to be an interesting wild card that the industry really wants to get behind.”
However, it’s not just the new entrants to keep an eye, said Lash. “The interesting thing is that the providers like AT&T, Verizon, etc. aren’t going down without a fight. They want to be a part of that business. They see it growing,” he explained. “And so 5G may really help shape the future of our industry, taking us more into the communications sector, which is what data centers really are, rather than just a box with space and power.”
New Market Entrants
“Another trend I’d like to reiterate is the amount of investors and the type of investors coming into our business,” he concluded. “There are investors who would usually be involved with insurance, now coming into the data center business. It has really matured. So I think that some of the margins will shrink ahead of that, but the growth will be incredible. There could be some unsophisticated buy-in, but I think Atlanta is safe. Every transaction that we’ve seen in the last several years has been a good transaction. We haven’t seen a crazy number yet as far as what people are paying.”
For more coverage of Lash’s keynote presentation, check out previous CAPRE Insider Reports:
- CBRE’s Mike Lash Predicts More Sale-Leasebacks & More Hyperscale Deployment in ATL | “We Don’t See This Trend Slowing Down”
- Atlanta is in Expansion Mode: CBRE’s Mike Lash Gives Snapshot of the Activity on the Ground in Peach City
- Millennials are Arriving, Enterprises are Done Leaving, and Investors are Buzzing about Atlanta’s Data Center Market | CAPRE Exclusive with CBRE’s Mike Lash
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