By Kayleen Holder
Local Medina County leaders are being very careful what they say about the newest “server farm” moving in between Natalia and Lytle, which is still under a Non Disclosure Agreement. However, this massive datacenter will not be the first for Medina County.
Three facilities in this booming industry will be in our backyards soon. According to Synergy Research, which tracks the data center market, 2022 was a record-breaking year.
As announced in an article last week, a company whose name has not been disclosed, is investing an estimated $500 million for the massive “hyper scale datacenter” which will reportedly be located on County Road 6712.
“This is actually the 3rd large development of this type happening in Medina County,” said Medina County Judge Keith Lutz in an interview this week.
Talks about the first data center has been in the works for at least six years, and they are just starting to get construction underway. It is located near the intersection of Potranco and FM 471. The second will be located the Castroville area. And of course the third one, will be located between Natalia and Devine. The first two are owned by Microsoft, while the third is still not disclosed.
“They are similar size investments,” Lutz said, dollar-wise. He said the size of data centers can be anywhere from 200-500 acres, which is likely why these companies are seeking land in rural areas like ours, Lutz said..
Developers did receive a 381 tax abatement incentive (on county property taxes only) on the first project. Chapter 381 of the Local Government Code allows counties to provide incentives encouraging developers to build in their jurisdictions.
“It’s a partial abatement for a short period of time like 5 years, and after that, the county will be getting 100%…..As far as revenue, one of these data centers is equal to the amount of revenue you might get from 1,000 new homes,” Lutz estimated. And since they aren’t homes, he explained, local entities aren’t on the hook for providing costly basic services such as police, fire, EMS, schools, etc for thousands of new residents like they are when a large subdivision comes in.
To date there are just over a couple thousand data centers in the United States with a good number of them located in Texas. As of 2022, there were 2,071 data centers in the United States, according to Statistica.com, with 117 in Texas according to datacenter.com.
The Texas datacenters “include 103 colocation facilities, 90 cloud nodes, 31 Internet exchanges (IX), and 47 disaster recovery and business continuity,” according to a report on datacenters.com.
A Global Newswire press release states that the hyperscale data center market is projected to Generate $585.0 billion by 2030, according to Allied Market Research.
“Increase in demand for data centers to improve productivity and customer experiences drive the growth of the global hyperscale data center market. North America contributed to the highest share in 2020. During the pandemic, the entertainment and media industry assisted the hyperscale data center market growth. The industry witnessed rise in viewing of online and digital content as a result of the Covid-19 outbreak, which was facilitated by the widespread usage of the internet and consumer electronic devices (Globe Newswire).”
Last March, another large Texas data center, projected at $800 million dollars, announced plans to come into Temple, TX. That new facility, owned by Meta (formerly known as Facebook) was projected to total approximately 900,000 square feet when completed, and would be located on 393 acres, according to an article by PR Newswire in March 2022.
At that time, Governor Abbott told PR Newswire reporters, “Meta’s continued expansion in Texas is a testament to the exceptional business climate and skilled, diverse workforce we have here in the Lone Star State,” said Texas Governor Greg Abbott. “It is because of hardworking Texans and our commitment to helping businesses grow that companies continue to move and expand all across Texas. We are excited to welcome Meta to Temple and look forward to the new job opportunities they will bring to the local community, as well as the advancements in technology we will see in the future.”
A media release by Synergy Research on January 30, 2023 stated:
“New data from Synergy Research Group shows that 187 data center-oriented M&A deals closed in 2022 with an aggregate value of $48 billion, just shy of the record-setting $49 billion in deals that closed in 2021.”
“In the last seven years the total value of M&A deals has now passed the $200 billion mark, with almost half of that coming in the last two years. Since 2018 the average deal size has almost tripled, growing from $80 million to $235 million. Apart from the rapid rise in overall data center M&A activity, the most notable feature has been the extent to which private equity has flooded into the market. In 2020 private equity accounted for 55% of the value of closed deals, rising to 66% in 2021 and 91% in 2022. Since 2018 private equity funding has risen by an average 50% per year and in 2022 reached $44 billion.
“The highlights for 2022 were the $15 billion acquisition of CyrusOne by investment firms KKR and Global Investment Partners, and the acquisition of Switch by DigitalBridge for $11 billion. The 2021 highlights were the acquisitions of CoreSite and QTS, each for around $10 billion. These deals represent the four highest value acquisitions the industry has ever seen. All four acquired companies feature in the worldwide top 16 ranking of colocation operators, while they are ranked three through six in the US market, behind only Equinix and Digital Realty.
“Prior to these four record-setting transactions, the biggest data center M&A deals were Digital Realty’s $8.4 billion acquisition of Interxion, Digital Realty’s $7.6 billion acquisition of DuPont Fabros, the Equinix acquisition of Telecity for $3.8 billion, the Equinix acquisition of Verizon’s data centers for $3.6 billion and the acquisition of Global Switch by the Jiangsu Shagang Group of China, which was eventually valued at over $8 billion in transactions that were spread over three years. Apart from these mega deals, some of the most notable serial acquirers have been Equinix, Digital Realty, EQT, DigitalBridge/Vantage, Stonepeak, CyrusOne, GDS, GI Partners, Keppel, Macquarie, Mapletree and NTT.”
“Data centers are being viewed as long-term safe havens for investments, even during turbulent times, causing a huge influx in private equity. Ten of the twelve largest deals in the last twelve months have involved private buyers, with the only exceptions being the Equinix acquisition of Entel’s data centers and Digital Realty’s acquisition of a majority stake in Teraco. In the US, only six of the twenty largest colocation players are now publicly traded companies.”
So what is a hyperscale data center? According to Statistica, “A data center is a network of computing and storage resources that enable the delivery of shared software applications and data. These centers can house large volumes of critical data and therefore are vital to the daily functions of companies and consumers alike, with the security and reliability of data centers as key factors. As such, IT spending on data center systems worldwide is expected to reach 222 billion U.S. dollars in 2023.” [Statistica.com.]