Written by: Patrick Price, CRE, CCIM—Vice President of Operations, Property Tax
A recent article on Bisnow, a website featuring commercial real estate news, highlights how the advent of AI and the related increase in power consumption of servers have significantly raised the bar for data center capabilities. The rising costs and demands have led to a significant challenge for legacy data centers.
While major cloud providers are moving their models towards the newest, energy-intensive processors, more and more aging data center inventory is rendered obsolete. Retrofitting or upgrading facilities to meet today’s demands has been deemed infeasible for some, due to the prohibitive costs and challenges associated with such projects. This has resulted in millions of square footage in unused and obsolete data center space.
Property Tax Implications for Aging Data Centers
Many of these facilities still carry exceedingly high valuations for assessment purposes. In DMA’s experience, assessors have tended to gravitate toward the original cost of the property, understating the rate of depreciation or obsolescence that accrues early in the lifespan of a data center. This means that reduction opportunities existed for many data centers before the AI boom.
Now, with the rapid depreciation, obsolescence, and impairment of these facilities in recent years, there is a greater need for a reassessment of these property tax valuations. Those with property tax responsibilities in the data center industry need to be aware of these changes and consider them when assessing the value of their assets and formulating their property tax strategy.
While the data center industry continues to be a vibrant and growing sector, it is essential to be aware of changes and understand the implications for property tax purposes. The landscape is evolving, and so should the approach to property taxation within this industry.
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Take a Proactive Approach to Property Tax
Consult with DMA’s valuation experts to review your property holdings and protect against inequitable assessments—past, present, and future.