Business leaders in Nebraska take every available opportunity to refer to the state as the “Silicon Prairie,” a play on the term for Northern California’s cluster of big technology companies.
The idea behind the term — to bring those companies, and by extension, high-paying jobs and more money, into the state — is playing out in Sarpy County, which recently landed its eighth data center with Google’s $600 million announcement.
University of Nebraska-Lincoln researchers recently set out to determine how big an impact the data center industry has on the local economy, and their findings revealed some whopping figures.
The report, conducted by UNL’s Bureau of Business Research, found that operation of the county’s largest data centers has an annual statewide economic impact of $522 million, with an employment impact of nearly 1,900 direct and indirect jobs.
The analysis focused on the county’s four biggest centers: Fidelity, Travelers, Yahoo (now called Oath) and Facebook, including its planned expansion. The report was completed in April, before Google officially announced its future home in the county.
When completed, Facebook’s data center will clock in at about 2.6 million square feet; the three other centers are between 100,000 and 200,000.
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The construction process alone for data centers has a multimillion-dollar effect on the economy, according to the report. Every 10,000 square feet of data center constructed has a statewide $10.6 million impact, most of which — more than 86% — occurs in Sarpy County.
The report also measured job creation throughout the construction process by each job year created. If a project generates 100 job years, that could mean it creates 100 jobs for one year, 50 jobs for two years, 25 jobs for four years, etc.
By the same 10,000-square-foot metric used above, Sarpy’s data centers accounted for 53 job years.
The numbers presented thus far include both direct economic impact and what’s called “multiplier impact” — the ripple effect that occurs with demand for buildings and workers.
Eric Thompson, director of the Bureau of Business Research and principal investigator for the report, explains it like this:
Construction activity creates a demand for local products and services. The workers at the site, who are likely a mix of local and out-of-state employees, spend their paychecks at nearby businesses. Once the data center is operating, well-paid employees have money to spend.
All those factors, he said, multiply the economic impact data centers produce — which is generally true of any industry.
Given the explosion of data centers along Sarpy’s Highway 50 over the past decade, the question arises: Is there a ceiling to how many large data centers can or should be built in the area?
Thompson, also a professor of economics at UNL, said that possibility exists in most industries. But he’s not worried.
Sarpy’s group of data centers, Thompson said, is a good example of an “industry cluster” — a concentration of similar businesses in a specific geographic area. Other examples include insurance companies in Omaha and agricultural businesses in rural parts of the state.
There are benefits to such clustering because key infrastructure is already in place: The Omaha Public Power District is familiar with supplying power to data centers, which often want to use renewable forms of energy. State incentive programs already exist. Early companies show interested ones the way forward.
“As the cluster grows, it becomes even more attractive for additional entrants,” Thompson said.
The data center study was conducted in part because of interest by the Sarpy County Economic Development Corp. Andrew Rainbolt, the group’s executive director, said county leaders “wanted to be able to articulate the benefits and evaluate any issues” with the data center cluster.
“I have no idea what the data center world looks like in 10 years,” Rainbolt said, “but I don’t think our demand for the Internet or cloud computing is going to go away any time soon.”