Economic Development, Real Estate, and Technology

The economic ripple effect of SuperNAP

Call it an industrial park for the new economy

November 20, 2015
| By Pat Evans |
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Pyramid
The former Steelcase Pyramid in Gaines Township was designed as a 663,000-square-foot center for innovation. Courtesy 8THIRTYFOUR

Should Michigan legislators pass the necessary bills, the Switch SuperNAP data center hoping to call the former Steelcase pyramid home would have a much greater economic impact than its $5 billion worth of equipment.

A SuperNAP data center provides high-quality buildings with high-quality environment controls and network infrastructure to store data equipment for clients, said Jim VanderMey, chief innovation officer and co-founder of Grand Rapids-based Open Systems Technologies, or OST, which has clients that work with Switch.

“It’s almost an industrial park for the new economy,” VanderMey said.

Switch CEO Rob Roy holds hundreds of patents for data center operations and runs a very innovative tech company, VanderMey said.

Switch wants to be in West Michigan, which is why it’s asked the state government for an even playing field.

Three separate bills, simultaneously introduced in both the state House and Senate, would put Michigan on a level playing field with 18 states that already provide property, sales and use tax exemptions for data centers. All the bills only apply to equipment inside the facility. Switch would pay all real property, payroll and income tax.

The bills are not specifically tied to Switch. Essentially, data centers would be treated as another utility, similar to water and electricity. The sales tax exemption, for example, would free data center companies from paying taxes on the products that enable them to host the data within the center, which cost millions of dollars every few years to update. So, if Amazon, a client of Switch, were to purchase $30 million worth of equipment for use in the center, it would not have to pay the 6 percent sales tax.

“We fell in love with Michigan,” Switch vice president of government and public affairs Adam Kramer told the Business Journal. “It’s a place we can sell our clients on.”

Michigan offers a prime location for a large data center, with a lack of major natural disasters, a mild climate, low power costs and relative proximity to markets such as Chicago and New York City.

The deal, however, is not done. The state legislature must pass the bills with urgency, as Switch is eager to start up a data center east of the Mississippi River. Should politicians delay too long or decide not to pass the bills, the Nevada-based company could look to a state with the policies already in place.

“The company has said they want to be in Michigan all along,” said Tim Mroz, vice president of marketing and communications at The Right Place. “That does not mean it’s a done deal.”

Over the course of 10 years, Switch would invest approximately $5 billion into the site and buildings around the pyramid. That amount reflects both the data centers and the network infrastructure inside the additional buildings. The proposed development would be the largest and most advanced data center campus east of the Mississippi River.

“I cannot overstate the impact Switch will have on both the Greater Grand Rapids area, as well as the entire state of Michigan,” Right Place CEO Birgit Klohs said in a release. “The unparalleled technology and data infrastructure investments planned by Switch will unleash countless new possibilities for growth in our state.

“The future of business will be driven by data, and Michigan will be well positioned as a hub of data innovation,” she said.

The 10-year build-out would create “thousands of construction jobs,” largely hired from local contractors, as Switch did with its locations in Nevada.

Switch and its more than 1,000 clients will hire approximately 1,000 employees to work on the campus, with a commitment to hiring veterans.

That commitment is evident in the company’s precision operations, VanderMey said, including armed guards who walk with guests in the facility that stores sensitive data.

The company’s clientele includes eBay, Intel, Shutterfly, Machine Zone, Amgen, Dreamworks, HP, Intuit, Hitachi, JP Morgan Chase, Sony, Boeing, Cisco, EMC, Google, Amazon, Time Warner, Eli Lilly and Fox Broadcasting.

Switch has two SuperNAP centers in Nevada — in Las Vegas and Reno — that have attracted additional development in the state. The Reno center is in the Tahoe-Reno Industrial Park owned by Roger Norman, the man who bought the 87-acre pyramid site from Steelcase in May. Also in the Tahoe-Reno park is Tesla’s battery gigafactory, which led to rumors flying when reports of a large tenant tied to Norman potentially calling West Michigan home.

Switch’s name might not be as well known as the car company, but its draw is well documented.

“Nobody thought there could be a data center in the desert,” VanderMey said. “They’ve done a great job leveraging the environment to their benefit. It has a lot of ripple effects and has done a lot of good for the region.”

In July, Machine Zone Inc., the company behind iPhone’s high-grossing “Game of War: Fire Age,” announced a $50 million investment by purchasing 4,000 servers in Switch’s southern Nevada location, according to a report in the Las Vegas Sun.

“We are locating our major data operations into the best data center in North America,” Machine Zone Chief Legal Officer Victoria Valenzuela wrote in a letter to the Nevada Governor’s Office of Economic Development board.

In September, the Sun reported Toronto-based Barrick Gold Co., the world’s largest gold mining company, opened its IT and corporate affairs hub in Henderson, Nevada — again, largely because of Switch. The office houses Barrick’s global finance and supply teams.

Barrick President Kelvin Dushnisky told the Sun it also would use Las Vegas’ McCarran International Airport “as a hub for receiving corporate visitors and dispatching employees to mines, spanning from Australia to Peru.”

“We’re already seeing some of that,” VanderMey said, referring to technology companies looking to come to West Michigan. “West Michigan is a design center largely tied to the office furniture industry, but as design and technology move closer together, West Michigan gets more attractive.

“This would be an accelerant.”

While attracting new companies is a major benefit, Mroz also said high-tech talent, of which West Michigan currently has a shortage, might be enticed to stay following college or might choose to come to the area.

“One of the largest benefits will be our ability to retain and attract high-tech talent to the region,” Mroz said.

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