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10 Hartford Business Journal | April 19, 2021 | HartfordBusiness.com Visit chelseagroton.com/growthatbusiness or call 860-448-4295 You can count on us! Our flexible lending solutions and experienced team may be just what your business needs. Emerging Industry In a crowded pond, CT goes fishing for data centers By Matt Pilon mpilon@hartfordbusiness.com F ueled by billions of dollars in annual investments by tech behemoths such as Google, Amazon, Microsoft and various other facility developers, the data center industry is fast growing, but Connecticut remains a bit player. State lawmakers in March passed a new law that hopes to change that, offering potentially decades-long property and sales tax discounts meant to make developers of the high-tech computing centers — which can cost hundreds of millions or more than a billion dollars to build — take a second look at the Nutmeg State. The new law comes amid surging demand in the U.S. and globally for computer power, spurred by the continued adoption of cloud- computing technology by large enterprises, a renewed focus on digital infrastructure in the wake of the pandemic-induced remote- working boom, and the anticipated emergence of 5G mobile networks and connected devices, according to Pat Lynch, senior managing director of data center solutions at real estate brokerage giant CBRE. "Every market has a data center need," Lynch said. "This is where it's encouraging to see different states embrace technology, because it's no longer an option. You will be at an economic disadvantage if you don't." The Connecticut incentives were rushed through the legislature's emergency certification process in response to a policy fight over a proposed transaction tax on stock trades in New Jersey that had equities exchanges such as Nasdaq and the New York Stock Exchange threatening to move their data centers out of that state. Besides Connecticut, the conflict also drew interest from Texas and Florida, with all three dreaming of poaching a modern and high-value sector from its northern New Jersey home. However, that lobbying fight now seems to have died down, and it's unclear whether it will result in any cross-state data center poaching. Connecticut is already late to the party, as at least 26 other states had data center incentives as of early this year, according to a recent report from Cushman & Wakefield. David Lehman, commissioner of the Department of Economic and Community Development (DECD), who recently estimated that Connecticut could see as many as 20 data centers built over the next decade, confirmed to HBJ this month there are no imminent deals on the table following Gov. Ned Lamont's signing of the bill into law, which becomes effective in July. However, Lehman said he and his team have talked to some major operators like Facebook and Amazon, and he's hopeful the new bait helps catch a few fish in the years ahead. Google has invested $22 billion over the past two years to build or expand its U.S. data centers and announced in March it will invest $7 billion in 2021. The company's data center footprint spans much of the country, but excludes Connecticut, focusing on states like Nebraska, Nevada, New Jersey, Ohio, Oklahoma, South Carolina and Texas. Luring that kind of investment, whether from Google or another company, is worth a shot, according to Lehman, who said there are no up-front taxpayer dollars on the line if the new incentives fall flat, while one sizable win could double the combined capacity of every existing data center in Connecticut. "We know empirically no data centers are being constructed in Connecticut," Lehman said. "And we know that data centers are being constructed in states with [tax exemptions.]" "If the investment proposition still isn't attractive, well then so be it, that's where we were before," he added. While the recent legislation was spurred by a desire to draw the eye of stock exchanges, the incentives aim to make Connecticut more attractive to a broader array of data operators and interests. "The way the legislation was crafted, we were focused on an industry, not just one discrete transaction or client," Lehman said. However, the law contains at least one provision aimed directly at the New Jersey situation: Incentive contracts would be permitted to exempt data center developers from any future transaction tax Connecticut lawmakers may pass over the life of the agreement. A potential boost for proposed New Britain data center The biggest Connecticut data center prospect that's publicly known at the moment is a 44-megawatt facility envisioned for part of the former Stanley Works campus in State economic development director David Lehman estimates Connecticut could see as many as 20 data centers built over the next decade as a result of newly-adopted economic incentives. HBJ FILE PHOTO