Cincinnati ranks average overall according to analysis of specific cost components including tax incentives, power, construction, land and labor
Los Angeles, December 8, 2015 – Cincinnati ranks among the least expensive markets when it comes to net tax burden and purchasing land for a 5-megawatt (MW) enterprise data center over a 10-year period, according to a new report from CBRE Group, Inc.The CBRE study modeled the cost of constructing, commissioning, and operating a 5 MW data center for 10 years across 30 U.S. markets, and categorized markets into three cost bands (low, moderate and high) according to analysis of specific cost components including tax incentives, power, construction, land and labor.
“Cincinnati is a very attractive market for Data Centers,” said Mike McMillan, Vice President at CBRE’s Cincinnati office. “Low tax rates and strong tax incentives, as well as inexpensive power contribute to lower total costs. Cincinnati is also attractive because of its proximity to robust connectivity; its fiber network has a low latency [the time it takes data to get from one point to another] to many large cities.”
- Tax Incentives: Data centers are capital intensive and generate significant sales and property tax revenues for state and local jurisdictions. Increasingly, markets that seek to attract data centers are offering significant tax incentives to help reduce the total cost of operations for data centers. Cincinnati is among the top three of the 30 enterprise markets in CBRE’s study with the lowest net tax burden as a share of the total project cost, behind Omaha, NE, and Portland, OR. The CBRE report found that Cincinnati’s net tax burden accounted for 3.4 percent of the total project cost, well below the 8.7 percent average total project cost across the 30 markets.
- Construction Costs: Construction costs in which to build a Tier III facility in were slightly above average. At 36.1 percent, its facility construction costs as a share of the total project cost were only slightly above the 34.8 percent average share across the 30 markets in the study.
- Land Costs: Cincinnati’s land acquisition costs ranked as the seventh least expensive as a share of the total project cost of the 30 markets in the study, and at 0.5 percent, significantly below the 2.5 percent average share of the total project cost.
- Labor: With a need for critical environment engineers that provide round-the-clock coverage, labor costs average $13.2 million over a 10 year-period and account for an average of 4.9 percent of the total project cost. Market-rate labor costs were slightly above average in Cincinnati at 5 percent when compared to the other 30 markets in the study.
“The ever-increasing need for data exchange, storage and security is broadening demand for data centers in the U.S., but one solution does not fit all,” said Pat Lynch, managing director, Data Center Solutions, CBRE. “Capital and operating costs vary considerably by market, and non-monetary factors such as proximity to a headquarters location, fiber density and environmental and other risk factors can also drive enterprise site selection decisions.”
The full report can be accessed here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.