Data Centers Increase Return to 50%: Here’s How

Data centers could receive a 50% return on investment when building in the Minnesota Technology Corridor’s Centerville site, found a study completed by Excipio Consulting. 

When presenting the report, Jeff Gilmer said, “This site was generating double the return for a data center provider. Most data center operators are looking for 30% return. At Centerville it would be close to a 50% return on investment. Developers looking to build only would also experience a higher return due to construction tax incentives and low property costs.”

Excipio ran several models with investments ranging from $20 - $30 million. Their designs allowed for coveted higher rack density, maximizing the computers per rack with the supporting data bandwidth to support them. “Through the appropriate design we can maximize the return,” said Gilmer.  The Minnesota Tech Corridor has identified Centerville and other sites that fit data centers specifically and can support buildings designed to maximize rack density. 

Tax Incentives for Data Centers

Minnesota’s tax incentives and rebate program allows data centers to benefit at multiple stages of the project – during construction and ongoing operations. Gilmer encourages investors, developers and data center operators to calculate the incentives to get to a true net number for their analysis.  For example, very few states provide incentives based on compute assets – Minnesota is unique in having this in addition to the construction and power usage incentives. “This significantly reduces the cost of a data center for the end user,” said Gilmer. “Minnesota stands out in how it has combined incentives to reduce the long-term operating costs of a data center,” he added. 

Three Categories of Data Center Incentives 

#1 Equipment rebates

The company can own the data center and purchase equipment, then receive a tax incentive back for the equipment. A provider can build the data center and their customers can purchase the equipment and receive that same tax incentive. Any data center built by 2022 receives 20 years of rebate, with the rebates declining by one year thereafter. 

#2 Power rebates

Any taxes paid on the cost of power are available as a rebate. If the cost is 10 cents, for example, and another one is at 8 cents and they both pay 10% sales tax, the 8 cent is then at 9 cent per kw. If the other is rebated it is at 9 as well. In the state of Minnesota compared to another state, Minnesota may be more cost effective when you apply the rebate appropriately. 

#3 Construction incentives

Rebates and incentives are available throughout the construction process

Secure Your Data Center Site in the Minnesota Tech Corridor

Low property costs, dual energy providers, workforce availability and incentives all combine to make the MN Tech Corridor the right place for data center developers and operators. Contact us for more information or to plan a site tour.