Data centers on rise in rural areas

The $100 million facility -- to be built over the next 18 months on a 30-acre plot of land -- is the latest high-tech facility proposed for a rural part of Central Washington best known for apple orchards and wheat fields. But there's another big reason why high-tech giants such as Microsoft Corp. and Yahoo have gobbled up acreage above the Columbia River in recent months: cheap hydroelectric power.

That electricity, generated for as little as 2 cents per kilowatt-hour by local public utility districts, is attracting technology companies that need state-of-the-art facilities to host a range of Internet services, from online video to digital photos. Cheap power is a big benefit for data centers because it is necessary to keep computer servers cool.

In April, Microsoft began construction on a massive "server farm" on 74 acres of land just north of downtown Quincy. Yahoo broke ground last week on a similar facility a few miles away. Google, which already operates a large data center in The Dalles, Ore., and Ask.com, an Internet search engine owned by IAC/InteractiveCorp., have been nosing around Central Washington for possible data center space.

Sensing an opportunity, Sabey Corp. is setting out to build a facility in East Wenatchee that could service smaller Internet companies that don't have the financial wherewithal, expertise or desire to operate their own data centers. Although the Seattle developer has not yet landed a tenant for the planned 100,000- square-foot facility just north of Pangborn Field, Senior Vice President of Real Estate John Sabey plans to start actively marketing the property now that it has an option on the land and a power contract with the Douglas County Public Utility District.

The 11-year deal with the PUD allows Sabey to draw up to 30 megawatts -- a massive amount of electricity that would easily make it the largest customer in the county. By comparison, the Eastmont School District -- currently the largest customer -- has an average consumption of about 1.5 megawatts, said Bill Dobbins, manager of the Douglas PUD.

Dobbins -- who is in the early stages of working with another data center company called Pangborn Investors Group and last year discussed opportunities with Yahoo -- said that the economic benefits to the PUD are negligible.

"Based on the power contracts we have in place today, it is basically a trade-off," said Dobbins, adding that there could be some tax benefits to the county.

Sabey has placed big bets on data centers before, only to watch the market deteriorate. After building new facilities in Los Angeles and Denver, it sold the properties amid the dot-com bust. It now owns just one data center, the 76-acre Intergate complex in Tukwila.

Still, Sabey believes that times have changed. The current market for data centers is now being driven by the space needs of individual Internet companies rather than co-location providers such as Exodus and AboveNet, which were fueled with "Wall Street money" and chasing the same opportunities.

"We are not going to put up a 100 percent built-out facility like people were doing back in 1999 and 2000, where it was 'build it and they will come,' " Sabey said. "We will market it, see what demand warrants and build what demand is out there." The firm still has about 300,000 square feet of space open at its Intergate complex in Tukwila.

Sabey said company officials have been looking for potential sites in Central Washington for two years, a process that accelerated about six months ago when they learned of Microsoft's plans in Quincy. That project, along with Yahoo's, validated the area as a good place to build data centers, Sabey said.

"It lends credibility to other users that are looking at it," Sabey said. "They can say, 'Well, if it is good enough for Microsoft and Yahoo, it has got to be good enough for me.' "

In addition to cheap power, Central Washington is more geologically stable than the coast. It also has telecommunications and transportation infrastructure in place, Sabey said.

While officials in Central Washington have welcomed the interest from some of the world's most powerful Internet companies, they admit that the facilities won't employ that many people. The Sabey facility, for one, will most likely generate only 30 to 50 jobs.

Pat Haley, an economic development officer who serves as the director of the Port of Douglas County, said that a manufacturing facility that consumed 30 megawatts would typically employ 200 or 300 people. Still, he said the Internet companies will pay more for entry-level jobs and -- with four data centers in development -- a clustering effect could occur in which even more companies are attracted to the area.

"It is really a shift and a change into a whole labor market that we have never had before," Haley said. "We are quite excited about it."

Terry Brewer, executive director of the Grant County Economic Development Council, said it is a good thing to have companies such as Microsoft and Yahoo popping up in the community. Brewer said he has discussed data center plans with about seven companies, with a few of those still looking for facilities in the area.

"We hit the radar screen, and once one found out about it, the word leaked out," said Brewer, who declined to disclose names of potential tenants. "There may be more to come."

Haley -- who just this week received an inquiry from an Atlanta construction company about building a new data center in the county -- said he has been forced to re-evaluate his marketing efforts and economic development strategy over the past year.

Eighteen months ago, he never really thought about promoting cheap power to Internet companies -- focusing instead on manufacturing companies. That changed when the Internet companies started approaching him.

"We didn't know much about them," he said. "We quickly learned what they do and what it means to our valley. Essentially, it is an industry shift."

P-I reporter John Cook can be reached at 206-448-8075 or johncook@seattlepi.com.

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