Plan For New England's Largest Data Center Campus Clears Key Hurdle, Could Create New Regional Hub
A hyperscale data center campus is moving forward in Western Massachusetts that would be the first such development in New England and one of the largest in the nation.
The $2.7B proposal cleared a major hurdle this week, and experts say the project could spark additional development and create a new hub for data centers in between Boston and New York City.
State officials this week signed off on a tax agreement between developer Servistar Realties and the city of Westfield, approving what is effectively a property and excise tax incentive that supporters say is a prerequisite to bringing the hyperscale campus to fruition.
Even amid a global digital infrastructure building boom, New England has remained something of a data center desert, a fact industry insiders attribute to high power costs and a potentially tricky tax and regulatory environment. But with proximity and connectivity to some of the nation’s largest population and economic hubs, other data center developers are eyeing the region and preparing to pull the trigger if the Westfield campus demonstrates that the region can be viable for hyperscalers.
“I think this one project is probably the groundbreaking project for Massachusetts, specifically, but also all of New England," said Jeff Daley, CEO of community developer Westmass, who has served as a consultant for the planned Westfield campus. “I've actually gotten two calls from outside developers saying, hey, if this thing goes through, we’ll be in touch.”
The development team behind the $2.7B Westfield project — led by Connecticut-based energy trader Erik Bartone — hopes to build more than 2.7M SF of data processing and storage space across 10 buildings on a former industrial site off I-95.
Construction could start as early as 2023, with gradual build-out over as many as 18 years. Documents filed this summer indicated the site plans to have 150 megawatts of power capacity, making it by far the largest data center campus in New England and one of the largest in the country.
As with most hyperscale data center projects, the developers are acting on behalf of one or more large technology companies — usually cloud providers or social media companies like Amazon, Google or Facebook — that will be the facility’s primary tenants. Bartone says his group is representing two potential tenants, which he has described as “fortune 50 companies.”
In October, Westfield City Council approved a tax abatement plan that would effectively absolve the developers of taxes owed on the equipment inside the data center. Similar agreements have become a prerequisite for any sort of large-scale data center development, industry insiders tell Bisnow, with more than 25 states — including nearby Connecticut — offering similar incentives at the state level. The state’s Department of Housing and Economic Development gave final approval to the plan early this week.
In many respects, Western Massachusetts — particularly Westfield — makes sense as a potential data center hub, industry insiders tell Bisnow. Proximity to end users is increasingly important for the cloud providers likely to occupy the site, and 34 million people live within a radius of just over 100 miles from Westfield. That’s a territory that includes New York and Boston, along with smaller cities like Albany, Hartford and Providence. Crucially, the area also has robust fiber and other telecommunications infrastructure to reach these markets and sits near the interconnection points of a number of long-haul cables needed for hyperscale developments.
“There’s a very robust network along the I-91 corridor that links Westfield to Manhattan, [which is] a very unique and valuable resource,” Bartone said. “They’re interconnected to the cross-Atlantic cables that come out of the northern part of Boston, markets outside the United States are accessible through this network.”
Despite these selling points, experts say Massachusetts and New England have remained the data center hinterlands for one reason: the cost of power. With electricity accounting for as much as 60% of a data center’s operating costs, the price of power is a primary consideration when it comes to siting these facilities. And Massachusetts is one of the most expensive retail power markets in the country.
Bartone says that despite the region's high energy costs for consumers, wholesale energy in Massachusetts — purchased directly from power generators and taken off transmission lines — isn't such an expensive outlier nationally.
A principal at Connecticut-based EBS Energy whose primary background is in wholesale energy trading, Bartone expressed confidence that ongoing negotiations with power providers will yield a rate that will be attractive to hyperscale data center operators who need to be near major population and economic hubs, particularly New York.
“Are we at the low end of the cost spectrum? No, but we are in the range of places like New Jersey or New York or the new areas that serve financial district markets like Rockland County,” Bartone told Bisnow. “We're somewhere in the middle of those, so we're in a price range that's very attractive for players like the big hyperscale guys and certainly the colocation guys that are absorbing rates that are much higher than what we're talking about.”
Whether the project comes to fruition will rest on the ongoing negotiations with Eversource, ISO New England and local utility Westfield Gas and Electric. Should the project be viable, industry insiders say the region could see a surge of data center development. Indeed, the primary broker behind the Westfield campus told local media that two other developers are waiting on the project’s outcome to propose their own developments.
“I think there's a great opportunity in Massachusetts if the energy cost could be controlled,” MassWest’s Daley said. “That and taxes are the two factors weighing us down compared to places like Maryland, Virginia and places down South, but I think the industry could thrive here.”