Digital Realty reduced its downtown Dallas investment plans by 87 percent, pulling back a data center redevelopment and passing up incentives.
The firm requested to modify its development agreement with the City of Dallas, after it pivoted from a $104 million data center expansion and instead spent just $13 million to renovate an office and data center building at 2323 Bryan Street, the Dallas Morning News reported.
About $88 million, or 85 percent of the previous budget, was earmarked to expand the site’s data processing capacity, according to its agreement with the city in 2021.
Digital Realty moved its headquarters to Austin from San Francisco that year and acquired the Bryan Street site as part of its expansion in North Texas.
The company cited “unforeseen circumstances and technical challenges related to the expansion of the data center capacity,” according to a memo from city staff. The building renovation is already complete.
The city is proposing to eliminate Digital Realty’s tax abatement, which would have reduced the company’s business personal property tax burden by half. The city is also seeking to modify the state’s Texas Enterprise Fund agreement, which included a $2 million grant tied to the original investment scope.
City officials recommended lowering the capital requirement from $104 million to match the $13 million already spent in order to keep Digital Realty eligible for the TEF funding.
They also recommended tightening job creation conditions to increase the required full-time headcount from 143 to 175, maintaining an average salary of $120,000 and lowering the job grant from $1,000 to $290 per hire, capped at $50,000, down from $200,000. The local hiring threshold would fall from 35 percent to 25 percent, with remote and hybrid positions now counting toward the total.
The company has already met its original employment target and surpassed the salary benchmark, according to the city.
Digital Realty has not commented.
The Bryan Street property was one of three major North Texas sites Digital Realty has tied to economic development packages. In Garland, the company recently secured more than $1 billion in incentives for two data center campuses.
Dallas officials have expressed frustration over the downtown pullback but showed an eagerness to keep Digital Realty in the city. The revised agreement is expected to go before the City Council later this month.
— Judah Duke
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