Why Minnesota is an Emerging Data Center Market to Watch

Why Minnesota is an Emerging Data Center Market to Watch

As other markets saturate, new ones like Minneapolis contain the infrastructure, tax incentives, and regional attractiveness that position it ready to rise as demand continues to grow throughout the country.

Wendy Dietzler is VP of Education & Conferencing for Critical Facilities Summit at Trade Press Media Group.

Ashburn. Chicago. Dallas. Santa Clara. We all know the hottest regions for critical facility and data center activity. While these markets are certainly driving new projects for mission critical facilities, they aren’t the only U.S. locations attracting data center interest.

The Data Center Map resource totals the number of “colocation data centers” both domestically and abroad. Based on their data, the 12 states that compile the “Midwest” are home to 362 data centers out of a total 1,655 in the United States, representing about 22 percent of the total market. These are the numbers broken down by state: Illinois (85), Ohio (71), Michigan (47), Missouri (37), Minnesota (32), Indiana (28), Kansas (15), Iowa (9), Nebraska (9), South Dakota (3), and Wisconsin (2), North Dakota (0).

Illinois is the clear leader, hosting the most data centers and colocation facilities in the Midwest. Ohio, Michigan, Missouri, and Minnesota are the next strongest locations currently expanding or drawing new data center activity. This year, RE Journals reported that “Minneapolis ranks as the second-strongest data center market in the Midwest” behind Chicago. Minneapolis, Minnesota, in particular, offers several key reasons to be considered as an emerging geography for the data center industry and broader critical facility markets.

Top Tier 2 Data Center Marketplace

A combination of new state tax incentives, low utility costs, favorable climate and a high-tech infrastructure has allowed Minneapolis/St. Paul to emerge as a top Tier 2 data center marketplace. The 2011 Minnesota Legislature passed into law a data center tax exemption bill for qualifying facilities. The Minnesota Department of Employment and Economic Development states that “Companies that build data or network operation centers of at least 25,000 square feet and invest $30 million in the first four years qualify for the tax break.” The tax exemption is applicable on all data center infrastructure, equipment and power for a period of 20 years. Additionally, at least 75,000-square-feet of raised-floor data-center space (equivalent to 10 MW) in new, Tier III, purpose-built facilities has come online in Minnesota since the beginning of 2014.  As a result, there is a combined 36,200 sq. ft. of capacity (5.45 MW) under construction in both new facilities and expansions.

Strong Life Science Population

Mission critical facilities encompass a number of industries that cannot experience downtime, including hospitals and laboratories. The healthcare industry is one of the top users of shared Twin Cities data center space (alongside finance). Jones Lang LaSalle recently ranked Minneapolis among their top 16 “clusters” in the US for Life Sciences activity in 2016. Minnesota is already home to many major players in the healthcare and life sciences sectors, including medical device companies, bio/pharmaceutical companies, healthcare facilities, etc. The Mayo Clinic, Abbott, Novartis Pharmaceuticals, Ecolabs, St. Jude Medical, are just a few located on the “Medical Alley” running between Rochester and Duluth.

Fortune 500 Headquarters

Minnesota’s lineup of Fortune 500 companies at the end of 2016 numbered 17, a figure that is unchanged from 2015, with their positions on Fortune’s annual list more or less holding steady. Additionally, 17 Fortune 500 companies also have their headquarters in the Twin Cities region, including: UnitedHealth Group, Target, CHS Inc., Best Buy, 3M, U.S. Bancorp, Supervalu, General Mills, Land O’Lakes, Ecolab, C.H. Robinson, Ameriprise Financial, Xcel Energy, Hormel Foods, Mosaic, Thrivent Financial for Lutherans, and St. Jude Medical. This wealth of business opportunities suggests ample need for data centers and service providers. As a result, in order to meet the demand from these companies, Twin Cities data center supply is at an all-time high with the rising development of new facilities by regional and national colocation providers.

Additional Benefits

Looking past Minneapolis, the Midwest region houses critical facilities for some of the country’s largest players, including Facebook, Google and Microsoft. Chicago – a Data Center Tier 1 city – is the strongest representation of data center growth among the Midwest states. Data Center Knowledge regularly reports on activity in Chicago and recently cited information from North American Data Center’s 2016 Data Center Real Estate Review, which states that Microsoft’s second-largest data center leasing deal in 2016 was for 30 MW with EdgeConneX in Elk Grove Village, Illinois, located outside of Chicago.

Similar to Greater Chicago, Minneapolis also boasts a famously cold weather climate, enabling on-site utilization of high efficiency air-side or water-side economizers. In these parts of the Midwest, free data center cooling can be achieved nine months out of the year. Additionally, the Twin Cities rank high in relation to similar-sized US cities in avoidance of natural disasters such as hurricanes, tornados, floods, earthquakes and temperature extremes.

Conclusion

Other companies in the industry aren’t overlooking the Midwest. TierPoint has locations in both Chicago and Milwaukee, Lightower acquired a data center in Ohio this summer, and Cologix operates three data centers, a total of 45,000 sf right in Minneapolis itself. Though not yet ranked among the top five data center markets, Minneapolis presents a strong case for additional growth in this sector as critical facility activity grows. As other markets saturate, new ones like Minneapolis contain the infrastructure, tax incentives, and regional attractiveness that position it ready to rise as demand continues to grow throughout the country.

Opinions expressed in the article above do not necessarily reflect the opinions of Data Center Knowledge and Penton.

Industry Perspectives is a content channel at Data Center Knowledge highlighting thought leadership in the data center arena. See our guidelines and submission process for information on participating. View previously published Industry Perspectives in our Knowledge Library.
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