Hyperscale-Driven U.S. Mountain West Data Center Markets Continue Building Up, And Big

Tract, a new player in the data center industry operated by veterans in the space, has plans to build big in Nevada. The company this week said it has completed an acquisition of more than 2,200 acres in the greater Reno market. In partnership with NV Energy, Tract aims to deliver 2GW of power capacity in a master-planned data center development on the site in Storey County, Nevada.

The land's total acreage within the Tahoe-Reno Industrial Center (TRI) is comprised of two areas commonly known as the Peru Shelf and South Valley. In addition to the land, Tract also controls over 1,100 acre feet of water rights at the site. Crucially, the company has an agreement with NV Energy to deliver over two gigawatts of power beginning in 2026. Tract was advised by L. Lance Gilman Commercial Real Estate in the land acquisition.

The 2 GW data center park will exist adjacent to well-established Switch, Apple and Google data centers in Reno. Microsoft has also established hyperscale roots in the greater Reno market, which has also recently attracted new, large data centers from wholesale providers such as EdgeCore and Novva Data Centers.

Tract's CEO Grant van Rooyen was one of the founders of Cologix, a company that also knows something about big data centers. In June of this year, DCF reported on how Cologix has pre-leased a 120MW data center in Ashburn, Virginia. The three-story, 455,000 SF Scalelogix ASH1 facility in Data Center Alley is billed as one of the largest single data centers in North America. The site, once occupied by a church, sits next to the world’s largest internet intersection.

Data center operators in Reno such as Tract, EdgeCore and Novva recognize the benefits of the market's direct long haul fiber paths to the Bay Area offering a ubiquitously cited three milliseconds of latency, while keying into the many advantages that data center operators enjoy in Nevada, including lower power costs, lower taxes, lower environmental risks and fewer regulations, as opposed to California.

"The demand for data center space in California continues to outpace the availability of land and power, so Reno's location just 250 miles and three milliseconds away makes it an incredibly attractive option for the world's largest cloud and internet companies," observed Clint Heiden, Chief Commercial Officer for EdgeCore. "Add to that a 30% lower total cost of ownership versus a comparable deployment in the Bay Area, and Reno simply must be considered by businesses searching for data center space near the west coast."

Las Vegas, Reno and Salt Lake City developments typify regional cloud cluster expansions

All the new data center developments in Reno typify the U.S. Mountain West region's recent spate of cloud cluster expansions. EdgeCore this August announced ground-breaking on its initial data center campus in metro Reno, with first development to accommodate an on-site substation and two data centers totaling 1.5 million SF and capable of supporting 216 MW of critical IT load. EdgeCore has agreements in place with NV Energy for the campus, with utility power delivery set for H2 2025, with completion expected late that year.

For its part, as noted by DCD this May, Novva Data Centers is planning to build a 60 MW, 30,000 SF data center campus in Reno, set to open in late 2024. As another relatively new entrant into the data center industry, Novva is no stranger to the U.S. Mountain West time zone, having made its bones in Utah with construction in 2020-21 of a 1.5 million SF hyperscale campus in West Jordan's growing cloud cluster.

Meanwhile, the existing Novva Tahoe Reno Data Center is a robust colocation site residing in Storey County's TRI development on a 20-acre campus with 300,000 SF of data infrastructure. Located near Lake Tahoe at above 4,500 feet of elevation, the site offers a high-altitude advantage, ensuring cooler temperatures and lower humidity levels for improved equipment performance. With over 180,000 SF of data center space, the site accomodates 250 kW to 30 MW clients, and boasts a centralized and secure on-campus 100 MW substation with N+1 redundancy.

Backed by Los Angeles real estate investment firm CIM Group and led by Wes Swenson, founder of leading Utah colocation player C7 Data Centers, the Utah-based Novva plans to expand across the United States to deploy up to 1 GW of data center capacity in strategic markets by 2027. As again noted by DCD, Novva this September acquired 165 acres of land in Mesa, Arizona at auction for $62.7 million, with company CEO Swenson reportedly the sole bidder for the land. In the meantime, closer to home, Novva will soon open a 275,000 SF, $400 million data center located on a 20 acre campus in North Las Vegas, Nevada.

In entering the Las Vegas market, Novva competes with Switch, long the dominant data center player in Las Vegas, even before its $11 billion blockbuster acquisition last year by DigitalBridge and infrastructure investors IFM. One of the largest cloud campuses in the world, the Switch Las Vegas CORE Campus spans least 2.3 million SF with 315 MW of power capacity. Other data center operators with a presence in Las Vegas include Flexential, EdgeConneX and DataBank.

Expected to open in late 2023, Novva's 100-megawatt Las Vegas facility will make for its third operational data center in the region, along with sites in Colorado Springs and Salt Lake City.

Data Center Tax Incentives Make the Difference

As well documented by DCF, the Salt Lake City market is another well-known force in the U.S. Mountain West's data center industry prominence. As rightly contended by Aligned Data Centers in DCF's pages as far back as 2020, Utah’s tax incentives for data centers are among the most attractive in the nation. And Aligned, operator of multiple data centers in Salt Lake City and a company in the habit of making build-to-suit land acquisitions there, would certainly know.

Of course, it's not just Aligned who's made big moves in Utah, where Meta/Facebook has ruled the hyperscale roost since well before 2021, when it tacked an extra 900,000 SF onto its multi-building Eagle Mountain Data Center campus. Not one to be left behind, in 2021 Google purchased 300 acres of land for a future campus in Eagle Mountain, very near where Meta/Facebook's huge data center campus resides. Outside of Utah in the Mountain time zone, Meta also has a significant presence in the states of Arizona and also Idaho.

The growing spate of campus-level developments by hyperscalers in Salt Lake City and Reno was recently well noted by BISNOW's Dan Rabb, in an article pointing out how, while the colocation data center industry in nearby Denver is holding its own, the megascale campus opportunities have largely passed that city by, due to Colorado's less welcoming tax codes.

Betting on Nevada

Looking back to Nevada, JLL's H1 2023 North America Data Center Report corroborates all development activity. "The supply in Nevada has grown significantly with multiple new campuses being constructed in both Las Vegas and Reno. Novva Data Centers is under construction on two campuses; one in Reno and one in Las Vegas which will bring 60 and 100 MW, respectively, to the Nevada supply."

Significantly, JLL's report adds, "The demand for Nevada is seeing new growth as the Southwest markets are all experiencing very limited supply. Nevada has grown into a popular secondary market as hyperscale/cloud companies continue to grow their footprint throughout all markets. Multiple providers have entered the market in Reno and Las Vegas to grow the supply that is needed for the unprecedented data center demand. In addition to Novva's 160 MW in two campuses, Edgecore has multiple buildings planned for their Reno campus which upon completion will bring upwards of 200 MWto the grid."

For data center users, JLL's report said that not only is the Reno market growing fast, but that more inventory is on its way, and that now would be the time to negotiate for capacity needed in 2 to 3 years. For data center providers, JLL's projection for Reno was even more on the nose: "Keep ... building out campuses. Power is king; find the power and build there. Demand is not slowing down."

Power is King

"Power is king" -- indeed. As power availability and capacity remain primal issues for data center developers and operators, with critical priorities including locating power, determining available volume, and controlling costs, CBRE's North America Data Center Trends H1 2023 report also explicity mentioned Reno, Nevada’s power availablilty (along with Charlotte, North Carolina’s) as being especially attractive to development.

In place to actualize the analysts' optimism, Tract's Senior Vice President of Utility Development is industry veteran and power expert Philip Sandino. Sandino was previously a director at Dominion Energy in Northern Virginia, where he created the company's Data Center Services unit. Commenting on Tract's land acquisition in Reno, Sandino wrote on LinkedIn, "The work is really just beginning, but the partnerships are solid and will get the job done."

Companies like Tract know that a key success factor in building a hyperscale data center ecosystem is scalable utility power, where as previously stated Tract has engaged with NV Energy in long-term plan to bring over 2GW of electricity to the two Tract sites.

“We have been working with Tract for nearly a year now and are excited to partner with them on these projects,” said NV Energy President and CEO Doug Cannon. “These data center parks will be some of the biggest consumers of energy on our system. Tract’s approach of long-range planning allows us to engage and collaborate early to ensure reliable, affordable and sustainable power will be delivered.”

TRI Again

In addition to the data center developers such as Tract that are establishing campuses at Storey County's TRI site in Nevada, the development has attracted billions in investment from technology, manufacturing and logistics companies such as Tesla, Redwood Materials and Walmart.

As assessed by a Tract press release, this convergence of economic activity was enabled by TRI’s forward-thinking development agreement, which allows for a wide range of pre-approved uses, seven-day grading permits, 30-day building permits, and robust infrastructure managed by the TRI General Improvement District.

“We look forward to working with Tract on their future plans for northern Nevada and welcome them to the state,” said Nevada's Governor Joe Lombardo. “As the Nevada economy continues to diversify, technology companies will be a key component of our growth.”

Ironically headquartered in the relative, regional tax-incentive desert of mountainous Denver as noted by BISNOW, Tract prides itself as a company that "acquires, zones, entitles, and develops master-planned data center parks to provide data center end users with speed and certainty."

"Tract land has access to pre-positioned power, water, and fiber in key markets where hyperscale and wholesale demand is going," continues the company's mission statement. "Our approach is collaborative with cities and counties to ensure development is targeted for the optimal locations to maximize the revenue and economic development benefits for the community, while being good stewards of the land and minimizing the impact on neighbors."

“We appreciate the relationships we have built with NV Energy, Storey County, TRI and the State of Nevada," concluded Tract CEO van Rooyen. “We look forward to building on those partnerships for decades to come. Our customers are facing challenges resulting from their rapid growth. We believe our master-planned, shovel ready campuses will allow them to leverage our investments to gain the speed and certainty that they prioritize.”

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