HSBC Postpones NY Data Center Project
HSBC has postponed a huge data center project in upstate New York, citing the "business climate." The decision by HSBC is the first sign that recent losses in the subprime mortgage market may prompt major financial companies to reassess the pace of their data center construction spending.
HSBC (HBC) left open the possibility that it may eventually build a data center in Niagara County, and local officials are hoping the decision is based on site location issues, rather than a wholesale decision to curtail the project. In May HSBC confirmed its plans to build a $139 million data center, to be followed by ongoing spending of $55 million a year over 15 years for a total investment of nearly $1 billion.
But early this month the bank decided not to buy the land it had targeted for the development in the small farm town of Cambria (pop. 5,000). After several weeks of rumors, HSBC issued a statement last week to local media.
"Given the current overall business climate, we are not proceeding at the original development pace we had planned for our data center in Niagara County, New York," said the statement from HSBC spokesperson Francine Minadeo. "We remain in the planning phase and will take appropriate steps to update local officials and surrounding communities as is necessary and appropriate."
Local officials remain hopeful that the decision reflects a temporary setback for the huge project. "Our staff is in constant communication with HSBC, and all indications are they are going to go forward with a project (in the county)," said Niagara County Economic Development Commissioner Samuel Ferraro. But Ferraro confirmed that if HSBC picks another site it will forfeit $89.5 million in tax breaks from the county – suggesting the decision to not buy the land was not made lightly.
HSBC's reference to the business climate raises broader questions about data center demand from the financial sector, which has been a major driver in the industry's recent boom. Data centers are expensive to build, and the recent losses and plunging stock prices could lead major Wall Street banks to tighten spending.
HSBC was a large player in the U.S. subprime mortgage business, and first warned about the impact of loan defaults back in February. In September the bank's U.S. operation said it would close Decision One Mortgage, a subprime wholesale-lending unit. HSBC has set aside $3.4 billion to cover losses from bad loans, and recently said it would close 260 branch offices in the U.S.
The HSBC data center would have added 56 jobs paying an average of $76,000 and $14.5 million in town property tax collections over 15 years.
HSBC made a commitment to build the data center in upstate New York in October 2006, before it had even located a site, based on a commitment from the New York Power Authority to allocate 11 megawatts from the Niagara Power Project as part of the financial incentive package.
Specific plans for Cambria called for a 200,000-square-foot building and a 75,000-square-foot equipment yard to be built on 51 acres. The project was designed to allow for future expansion to 350,000 square feet.
HSBC, headquartered in London, is one of the largest banking and financial services organizations in the world. The company's international network comprises over 9,700 offices in 77 countries and territories throughout the world.
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By Rich Miller 
November 25, 2007 | Permalink | >Get Posts By E-mail
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