New York City built its reputation on being “the city that never sleeps.” For decades (and perhaps longer), New York has been the place to be for anything, and, well ... everything. Whether it was nightlife, food, culture, or something less glamorous (like telecommunications), the Big Apple tempted individuals and businesses alike to take a bite.
After finding a few worms in the apple, though, many enterprises started looking across the river. In the 1990s, New Jersey saw an influx of financial services that moved their data operations to the Garden State, a trend which continued to grow in the wake of 9/11 and Hurricane Sandy.
With the gold rush to New Jersey long over, recent overtures were made by some in the industry hoping to see legislation pass that would return the state to its former position as a thriving hub of data center activity. But, change has come again, and the state is now looking to boost its coffers with a financial trade tax that might find New Jersey hoist with its own petard. The state recently announced its intent to levy taxes aimed squarely at New York-based stock exchanges whose financial services infrastructure resides within its borders.
This one-two punch, fomented by a global pandemic on the one hand and the threat of rising financial trade taxes on the other, is causing many enterprises to look further afield for their data center operations.
NASDAQ, for instance, moved its PSX exchange to Chicago during the week of Oct. 26, 2020, and it’s likely more companies surrounding trading platforms and financial services firms will follow suit, looking for space outside of the metro New York area.
While this move may seem sudden, in reality, it’s part of a broader trend toward building out secure IT infrastructure to back up or replace existing sites in markets, such as Chicago, Columbus, and Minneapolis. Boosting this move is the high cost of housing IT infrastructure in places like New York City, combined with the increased remote workforce of 2020. The latter fact, in particular, means that organizations — particularly financial services firms — are no longer tethered to keeping on-premises infrastructure and are free to seek out multitenant data centers around the country.
Illinois became an increasingly attractive market when it passed legislation last year as part of a larger $45 billion capital budget that gives a sales tax exemption to data centers that have invested, or plan to invest, at least $250 million in the state and create a minimum of 20 full-time jobs. The state sweetened the pot with a 20% income tax break, provided facilities are built in low-income areas. Further exemptions come if all contractors and subcontractors comply with the Illinois Procurement Code’s responsible bidder requirements.
Chicago, home to a number of Fortune 500 companies and large financial firms, including the Chicago Stock Exchange, is exceptionally attractive to data centers. Part of its lure comes thanks to a favorable climate (both business and otherwise). As a central hub for several industries, the city has attracted numerous colo providers, meaning businesses can pick and choose what best suits their needs. Moreover, the chilly winter temperatures mean data centers can pipe in outside air to cool IT equipment, thereby lowering utility expenses. Add to this a relatively low risk of natural disasters, such as hurricanes, wildfires, and earthquakes, and it’s easy to see why Chicago is moving up the ranks as a top city for data centers.
Regardless of where they are headed, enterprises seeking colos, generally speaking, want to ensure the facilities offer cloud connectivity options for distributed, hybrid IT; access to low-latency, public cloud on-ramps; carrier-neutral options; rapid provisioning; and secure, remote access. Its current data center footprint and continued investment in infrastructure ensure that Chicago won’t be the “Second City” for long.