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Why a Dallas/Fort Worth Data Center?

Posted by Natalie Steinwand on October 15, 2020
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The Dallas/Fort Worth region is one of the largest and most active data center markets in the United States; benefiting from excellent power and fiber infrastructure, competitive economic incentives, a tech friendly workforce and robust competition among service providers.

What Makes Dallas/Fort Worth Attractive for a Data Center?

In the five years pre-COVID, the Dallas/Fort Worth (DFW) data center market grew steadily. A good deal of the demand in this market has been home grown originating from companies with a large presence in the area. However, many companies outside the area find the Dallas market appealing, and service providers report a growing percentage of data center requirements from outside the region. The attractiveness of Dallas/Fort Worth to firms seeking data center capacity is primarily due to five factors:

1.  Competitive Business Environment. DFW is home to over 100,000 businesses and has seen over 75 companies relocate their corporate or international headquarters to the region since 2012.[1]

2. Competitive Colocation/Cloud Ecosystem. A broad array of providers maintain facilities in the area providing prospective customers with a variety of competing alternatives from which to choose.

3. Reasonable Power Cost. Compared to other primary data center markets, electricity in the DFW area is relatively inexpensive.

4. Robust Infrastructure. The region boasts a robust power and fiber infrastructures.

5. Tax Abatement Incentives. The State of Texas passed legislation in 2013 to grant tax breaks for large colocation and enterprise customers.

Long favored by enterprise customers nationwide the Dallas market supports a broad range of industries.

The Customer Make-up of the D/FW Market[2]

Industry Share %
Cloud 8%
Tech 32%
Telecom 4%
Healthcare 15%
Banking and Finance 15%
Retail/Ecommerce 8%
Entertainment and Media 3%
Energy 3%
Other 12%

Dallas’ central location makes it attractive to companies seeking a location that can support all areas of the country. The area also benefits from its attractiveness as a disaster recovery location due to Texas’s independent power grid (ERCOT) that provides a safeguard from the impact in power outages in other areas of the U.S.

Growing Business Environment Suitable for Data Center Location

Dallas/Fort Worth’s high density of major corporations and geographic location has propelled a high level of investment in the area’s infrastructure on a local level, while the state of Texas’ aggressive, business friendly climate has led to a favorable tax structure for data center purchases.

Fiber and Connectivity

The DFW area is blanked by a host of fiber networks from a wide spectrum of providers including CenturyLink, Cogent, Level 3, Sprint, and Verizon. AT&T, headquartered in Dallas, has a fiber backbone that runs between Dallas, the area’s northern suburbs and
Fort Worth.

Power

Texas is unique in that it is decoupled from the interconnected power grids serving the eastern and western United States. Texas is the only one of the 48 contiguous states with its statewide power grid. As a result, the Dallas/Ft. Worth area is not subject to the Federal Power Act, a Depression-era law where the Federal Power Commission oversees all interstate electricity sales.

Due the state’s deregulation of the power industry and the abundance of in-state power sources including natural gas and a growing wind industry (providing over 18% of Texas’ electricity generation), DFW boasts some of the lowest power rates in the nation at 4.2 cents/kWh.

Economic Incentives

As a result of a 2013 bill, taxes are eliminated on qualifying data center hardware and software purchases. Although the exemption doesn’t apply to local sales taxes on purchases, data center providers and customers are 100% exempt from the 6.25% state sales and use taxes for up to fifteen years on electricity consumption and equipment purchases including purchases of servers, generators, storage devices and software. To qualify for an exemption, the data center must:

  • Total 100,000 SF of gross building area.
  • Achieve a capital investment of $200+ million over a five-year period.
  • Create at least twenty permanent jobs for locals.
  • Pay wages equivalent to 120% of the national average.

Summary

Dallas/Fort Worth is the nation’s third-largest data center market and includes proximity to multiple universities and community colleges as well as a large tech-savvy population. The market also benefits from some of the nation’s lowest power rates and an abundance of available fiber making it an attractive market for enterprises and hyperscalers. Compass Datacenters serves the Dallas/Fort Worth market via two data center campuses, offering over 250MW of IT load that are optimized for sustainability through the use of airside economization and the efficient use of all building materials.

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