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Supply Chain Quarterly – Port of Quincy, WA mentioned as Lowest Cost Intermodal Site for a Distribution Center

Supply Chain Quarterly – Warehousing Special Edition
September 2013
Three trends to watch
Same-day delivery, sustainability, and increasing regulation will all have an impact on the warehousing industry, but cost will still be a key factor for most companies.

For such a well-established industry, warehousing is experiencing a great deal of change of late. In fact, our firm, which helps companies select the best sites for their businesses, views distribution and warehousing as being at the leading edge of a number of trends affecting other key sectors like manufacturing, information technology (IT), sales, customer service, and even the head office.


Among the leading-edge trends that are forcing companies to re-examine their warehousing and distribution center (DC) operations, three in particular stand out: same-day delivery, sustainability, and increased regulation.


Article Figures
Sept 2013 - Cost to Operate a Distribution Center in the US West
[Figure 1] Cost to operate a distribution center in the U.S. West

The push for same-day delivery U.S. society is hungry for instant gratification. To satisfy that hunger, is on a quest for the “holy grail” of distribution—same-day delivery. The online retailing giant’s efforts can be seen in its recent decisions to locate warehouses in large and highly concentrated markets like California, New York, and New Jersey in spite of less-than-stellar business climates and high operating-cost structures. Facing increased taxes from cash-poor states and the coming of a national Internet sales tax, the Web merchant has shifted its DC site selection strategy from locating its fulfillment centers in low-cost, small-market cities in the hinterland to one focusing on proximity to major U.S. population centers. By doing so, the company has set the stage for offering same-day or next-day delivery to a major segment of the U.S. market.


Other companies in the booming e-commerce sector, all wanting to advance their case against brick-and-mortar retailers, will be following Amazon’s lead. Look for more DCs sprouting up in states like New Jersey, Florida, Illinois, Texas, and California in 2014.


Green leads the way In the past decade, sustainability and “green” principles have increasingly crept into the mission statements and core values of many corporations. Those ideals are having a direct impact on where DCs are located, what activities they perform, and how they operate.


For example, sustainability and green goals are driving forces behind the growing trend of locating new DCs close to intermodal terminals. Locating DCs near a rail terminal can help shippers reduce their carbon footprint by making it easier for them to incorporate more rail transportation into the supply chain. Rail is recognized as being considerably more “environmentally friendly” than over-the-road trucking. Consider the fact that on average, rail can move one ton of freight 476 miles on a single gallon of gas. This is the equivalent of your SUV getting over 250 miles to the gallon. The U.S. Environmental Protection Agency (EPA) estimates that railroads account for less than 10 percent of all transportation-related CO2 emissions while also alleviating highway congestion. Rail could get even cleaner if BNSF Railway continues to move from diesel to liquefied natural gas (LNG).


The green movement is affecting not only the location of distribution centers but also what activities they perform and how they operate. For example, Boyd Company clients Hewlett-Packard (HP) and Dell have increased the reverse logistics activities at their distribution centers. They are now receiving and processing more outmoded electronics and print cartridges at their DCs in an effort to reduce the environmental impact of their products. These efforts minimize the amount of waste that ends up in landfills and help customers dispose of unwanted products in an environmentally sound manner.


The pressure of new regulations Another trend affecting distribution center operations is the increase in legislation and regulation. For example, current legislation affecting the trucking industry might tilt the scales even more strongly in favor of distribution centers using intermodal services and locating near rail terminals. Regulations such as the driver hours-of-service rules and mandatory electronic on-board recorders (EOBRs) are helping to drive trucking costs upward. Trucking companies will also be hit hard once the Affordable Care Act takes effect and health insurance premiums start to rise. The Teamsters are especially upset that multiemployer, or “Taft-Hartley,” plans that cover unionized workers in the transportation industry will likely have higher premiums because the Affordable Care Act does not include tax subsidies for them. Given the rise in costs and the pressure on margins, Boyd Company is projecting over-the-road trucking costs to increase by about 6.3 percent in 2014. That’s up from a projected 5.5-percent rise in 2013. As labor and fuel expenses push overall trucking costs higher, more and more companies are choosing to use less costly intermodal services and locate their DCs closer to intermodal terminals.


One regulatory act that is receiving keen attention among our logistics clients is the U.S. Food Safety Modernization Act (FSMA). This law will have major implications for any company that’s involved directly or indirectly with our nation’s food supply. To comply with FSMA, food companies will have to produce a written food-safety plan, specific to each distribution center, that outlines hazards, prevention, monitoring, verification procedures, and a recall plan. Moreover, the U.S. Food and Drug Administration (FDA) will want to see proof that food was transported at the proper temperature throughout its journey. Both transportation companies and distribution centers will need a product-tracing system that is capable of tracking temperatures.


Compounding the difficulty of FSMA compliance is the lack of vertical integration within the U.S. food supply chain, which is made up of multiple enterprises like producers, packers, transporters, processors, distributors, wholesalers, and retailers. Rarely are more than a few of these enterprises controlled by a single entity. However, in order for FSMA compliance to work, there needs to be a certain level of supply chain integration among these enterprises. Our firm is forecasting that the intermodal sector will assume a leadership role with respect to FSMA. We believe that intermodal players will be able to build upon their experience dealing with multiple supply chain parties to oversee this level of integration.


As the intermodal sector assumes this leadership role, those DCs that handle food will see an advantage to being located close to an intermodal facility. Indeed, it’s important to note that perishable goods like produce, ice cream, frozen pizza, and fresh fruits and vegetables are now moving intermodally at record levels.


Costs still rule Although regulation, sustainability, and same-day delivery will all have an impact on the warehousing industry, the overriding issue confronting our distribution center clients has to do with cost containment. Bottom-line economics still rules the warehouse site selection process given spiraling fuel costs, a softened U.S. economy, continued uncertainty in Europe, and an ongoing credit crunch that is expected to stretch into 2014. For many of our DC clients, improving the bottom line on the cost side of the ledger is far easier than on the revenue side.


Even within the same U.S. region, operating costs for a typical DC can vary greatly by geography, and a less-than-optimum location will result in higher costs that could compromise the company’s competitive position for years.


Figure 1 illustrates how DC operating costs can vary within the U.S. West, a high-growth region for new facilities. This 2013 analysis includes all major geographically variable operating cost factors, such as wages, benefits, real estate, property taxes, utilities, and shipping. The chart shows, for example, that annual operating costs for a representative 500,000-square-foot DC employing 175 nonexempt workers range from a high of US $20.7 million in Los Angeles, California, to a low of $14.1 million in Quincy, Washington, a spread of $6.6 million, or a 31-percent differential.


In many cases, energy and construction costs contribute greatly to the differences in annual operating costs. For example, annual costs for land and warehouse construction in the most expensive location, Los Angeles, total $6.6 million, while those costs would be $4.2 million in the least expensive location, Quincy, Washington. Similarly, energy costs in Los Angeles total $2.3 million per year but only $713,000 in Quincy.


It’s often possible for companies to address cost containment through their efforts to respond to the three key trends discussed in this article. For example, locating close to intermodal terminals will help not only with sustainability efforts and compliance with food safety regulations but also with reducing shipping costs. Similarly, locating in Quincy, Washington, as opposed to Los Angeles could be not just cheaper but also greener, as the area has a green energy source: low-cost hydro power from the Columbia River.


In today’s increasingly complex operating environment, distribution centers that can find ways to effectively respond to these and other industry trends while also containing costs are the ones that will find themselves on the path to future success.

Port of Quincy confirms that Quincy has significant Fiber Optics Capacity and Availability

QUINCY, WA (November 24, 2008) – The Port of Quincy has recently confirmed that the Quincy area has substantial fiber optics capacity and availability.

In a recent letter that was sent from the Northwest Open Access Network (NoaNet) to the Port of Quincy Chairman Curt Morris, NoaNet writes “….there have been recent stories …which appear to suggest that Quincy currently has no more fiber availability than the rest of Grant County.  This characterization about Quincy is highly inaccurate.”

The letter goes on to say that “NoaNet made a substantial investment in fiber infrastructure, including equipment and more than 20 miles of fiber to and around Quincy….Our fiber capacity can support the needs of a multitude of new technology-based tenants on the Port property….Overall Quincy, and particularly the Port of Quincy industrial properties, is well-served with fiber.  This makes it a uniquely attractive location for tech-based companies.”

“We are glad to see NoaNet has reconfirmed the significant availability and access to fiber optics in Quincy,” said Curt Morris, Chairman of the Port of Quincy.  “With its state-of-the-art combination of fiber optics, electrical power, and water treatment infrastructure, the Port of Quincy has become one of the premier sites in North America for locating technology companies.”

Morris also indicated that NoaNet recently has confirmed there are at least five diverse routes operated by multiple networks providing for rich network diversity in Quincy.

On a related note, in the recent October 28th edition of, Debra Chrapaty, Corporate Vice President of Microsoft talked about Quincy and stated “…we created a heat map of the U.S., and we put in all these criteria, and we hit the button, and what came up as the best place to build a new data center was Quincy, Wash.  And it came up for two reasons: One that there was clean hydroelectric power, and the other was that the town had committed to fiber.”

For more information about the Port of Quincy’s fiber optics capacity and availability, contact the Port of Quincy at 509-214-7696 or NoaNet at 509-662-1244.

Quincy, Washington Named Top Small Market City in the West for High Tech Manufacturing in National Cost Comparison Study

Princeton, NJ, April 8, 2010 — A recently completed national site selection study which compared the cost of operating a high technology manufacturing facility among 45 small market cities in the U.S. has named Quincy, Washington “The Best in the West” (

The independent study ( was conducted by The Boyd Company, Inc. (a location consulting firm in Princeton, NJ) and focused on up-and-coming small market cities in each region of the country considered to be on the radar screen for new high tech industry as the economy emerges from recession in 2010/11. According to Chris Miller, the Managing Director of Economic Development Associates (a Seattle, Washington-based western rural economic development advocacy group), The Boyd Company study titled “A Comparative Operating Cost Analysis for High Tech Manufacturing in Selected Small City Locations” is the most comprehensive comparative cost study he has ever seen for small market cities.

In the study, overall costs were scaled to a hypothetical 250,000-sq.-ft. production facility employing 300 workers. Additionally, the analysis was structured to be a useful cost comparison tool for broad range of high technology companies engaged in advanced manufacturing operations and computer-operated production processes in sectors such as precision metalworking, engineered plastics, carbon composites and other advanced manufacturing fields.

Regionally in the West, annual costs range from a high of $28.0 million per year in Walnut Creek, California to a low of $21.1 million in Quincy, Washington (

“In today’s difficult business environment, comparative economics are ruling the corporate site selection process. For many companies, improving the bottom line on the cost side of the ledger is far easier than on the revenue side. As a result, location decisions at every level of the corporate organizational structure, from off-shored call centers and remote branch plants and warehouses right up to the corporate head office, are all being made with cost minimization as an overriding objective,” stated Jack Boyd, President of The Boyd Company. “Competitive pressures brought on by global free trade are also making comparative costs the white hot issue in today’s corporate boardrooms.”

Following are overviews of the top-ranked small cities in each region: Quincy, WA in the West; Ardmore, OK in the Central Region; and Lenoir, NC in the East:

Quincy, WA: Best in the West

Plentiful, low cost and green hydroelectric power is fueling much of the high tech growth in and around Quincy, WA (pop. 6,500). Located in the Columbia River Basin in central Washington, the area has attracted major facilities of Microsoft, Yahoo, Intuit, REC Silicon, and BMW-SGL. Quincy is rich in fiber optics and is located on the main line of the BNSF railroad and is linked to port facilities in Seattle/Tacoma via I-90. Water, which is in short supply in many western cities, is abundant in Quincy and its unique microclimate boasts 300 days of sunshine. With no personal income tax in Washington, workers in Quincy keep can more of what they earn.

Ardmore, OK: Best in the Central

Ardmore is strategically located along the NAFTA Super Highway, I-35, midway between Dallas and Oklahoma City. Its mid-continent location, low land costs, construction costs and utility rates have attracted a number of advanced manufacturing firms like Michelin, Valero, 3M, Southwest Silicon and recently announced Flanders Corporation, a major producer of cleanroom air filtration systems. Ardmore is only 90 minutes from the high growth northern suburbs of Dallas, DFW International Airport and major metropolitan area amenities of the greater Dallas-Ft. Worth area.

Lenoir, NC: Best in the East

Lenoir is shedding its image as a furniture industry capital and establishing itself as the epicenter of a new cluster of high technology companies locating along the U.S. Highway 321 corridor stretching from Charlotte to the Tennessee border. Joining old line furniture firms like Broyhill, Bernhardt and Fairfield based here are high tech giants like Google, Corning, Apple and Commscope. A favorable labor market, low costs, a moderate climate and proximity to Charlotte are major advantages for Lenoir.

Microsoft expanding data center at the Port of Quincy

Quincy, Wash. (May 20, 2010) –  As a result of the tax incentive recently approved by the Washington state legislature to spur high-tech data center development in rural areas, Microsoft is now expanding its data center at the Port of Quincy (in Quincy, Washington).


In 2006 and 2007, Microsoft constructed the first phase (470,000 square feet) of the ‘Columbia Data Center’ in Quincy, Washington (  The Columbia Data Center is already ranked as one of the top 10 biggest data centers in the world (  When the new expansion in Quincy is completed, it is estimated that Microsoft’s Columbia Data Center facility will be the largest data center in the world.


Patrick Boss, Business Development Director for the Port of Quincy, said Microsoft started the excavation for construction of new data center building about 10 days ago in one of the Port of Quincy’s industrial parks.  For Microsoft, its data centers run services such as its Bing search engine, Hotmail and cloud-computing platforms, including Azure and Microsoft Online Services. The company has built large facilities in Chicago, Dublin and San Antonio in the past year.


Microsoft has indicated that it likes Quincy because of the area’s abundant, low cost and green hydroelectric power and high capacity, state-of-the-art fiber optics.  In 2008, Debra Chrapaty, Corporate Vice President of Microsoft, made the following comment to “… we created a heat map of the U.S., and we put in all these criteria, and we hit the button, and what came up as the best place to build a new data center was Quincy, Wash. And it came up for two reasons: One that there was clean hydroelectric power, and the other was that the town had committed to fiber.”


More recently, Microsoft stated in a recent report titled ‘Top 10 Business Practices for Environmentally Sustainable Data Centers’ that: “Our data center facility in Quincy, WA uses 100% renewable hydropower from the Columbia River Basin”, which helps to reduce Microsoft’s carbon footprint.   “Addressing global warming is a responsibility we take very seriously at Microsoft,” said Steve Ballmer Chief Executive Officer of Microsoft. A new data center has to be at least 100,000 square feet to qualify for the tax exemption. Yahoo and Intuit also have large data centers in Quincy.


“We have had a lot of interest in the past two months since the tax exemption was approved,” Boss said. “In fact, site selectors from several high-tech companies have visited Quincy recently. The Microsoft site expansion will probably create even more interest.”


Boss estimated the data center employs about 50 people, not including those who worked on building the facility.  “For a community the size of Quincy (pop. 6500) it is a good number of jobs.” he said. “Also, the property tax revenues generated from the data centers have been a tremendous help to Quincy and has allowed the community to invest more in infrastructure and education.”


Below are links to similar news stories regarding Microsoft’s expansion at the Port of Quincy:

Site Selection Expert Predicts New Wave of Data Center Investment in the Quincy, WA Area

Growth to Be Fueled by State’s New Sales Tax Exemption

The Boyd Company recently completed a national site selection study which compared the cost of operating a high-technology manufacturing facility in 45 small market cities in all regions of the U.S. The study ranked Quincy, WA, as the lowest cost in the Western Region, or “Best in the West,” based on costs for labor, power, land, construction, and taxes. Lenoir, NC, ranked “Best in the East” and Ardmore, OK, ranked “Best in the Central.”

According to Jack Boyd, the Quincy, WA area ( is one of the premier sites in North America for locating high-technology companies because of its combination of abundant, low-cost and green hydroelectric power, high capacity redundant dark fiber, ample supply of skilled labor (over 100,000 people in a 30-mile radius ofQuincy), very close proximity to rail (BNSF mainline) and interstate freeway (I-90), and convenient transportation linkages to ocean ports (i.e., Port of Seattle and Port of Tacoma) and Midwest markets (i.e., Chicago).

Boyd says Quincy is well-positioned to attract a broad segment of high-technology companies engaged in advanced manufacturing operations and computer-operated production processes in sectors like precision metalworking, engineered plastics, composites and other advanced manufacturing fields. In the growing area of composites, global auto maker BMW recently selected a site very near to Quincy to build a joint venture carbon composite manufacturing plant with SGL that will create carbon-fiber reinforced plastics for BMW’s upcoming Megacity vehicle (

Additionally, with last month’s passage of a major tax incentive/exemption bill (by the Washington State Legislature and signed by Washington State Governor Christine Gregoire) to encourage companies to build data centers in rural areas of Washington State, Quincy is especially well-poised to attract new data center operations and is considered by Boyd as a premier North American site to establish or expand a data center.

Already the tax incentive has had a direct positive impact on data center development in Quincy, with Microsoft recently announcing that it will be doing a major expansion of its data center at the Port of Quincy. See below related articles.

According to the Washington State Department of Revenue, the new rural data center development tax exemption/incentive in Washington State applies to:

  • Sales of server equipment that will be installed in a data center.
  • Labor and service charges for installing servers, and to sales of power infrastructure equipment.
  • Sales of power infrastructure.
  • Labor and services for construction of power infrastructure.

To be eligible for the tax exemption, data centers have to be at least 100,000 square feet to qualify and construction must begin between March 31, 2010 and July 1, 2011.

For more information, contact Jack Boyd of The Boyd Company at 1-800-974-2693, or contact Pat Boss of the Port of Quincy at 360-878-7073 or email

Quincy Cashes in on the Cloud

Data center building plans by companies such as Dell, Microsoft, Yahoo, and Google are helping small rural towns cut deficits

Inside a white metal fence laced with barbed wire on the outskirts of Quincy, in central Washington state, a construction crew maneuvers excavators that scoop up giant piles of earth. Just beyond the site, green shoots of wheat are beginning to sprout as rain drizzles overhead on a recent late-April morning. Holder Construction is three weeks into the creation of a 350,000-square-foot building that will house thousands of servers capable of storing data and delivering software and other computing tasks. Dell (DELL), the computer maker behind the project, is spending $1 billion in two years to erect data centers around the world. It joins such companies as Microsoft (MSFT), Yahoo! (YHOO), Intuit (INTU), and Sabey that have purchased land in Quincy to build data centers to capitalize on the boom in demand for computing provided via the Internet, over the so-called cloud. The biggest names in technology are building a digital, 21st century equivalent of the railroad. And just as some cities benefited disproportionately from the location of rail lines and stations a century and a half ago, small towns in rural America are angling to cash in on the boom this time around. Bucking a Downtrend

Municipalities like Quincy are becoming increasingly sophisticated about how to use tax breaks and other incentives to attract construction. The stakes for small towns are higher still after the recession led to a surge in joblessness and left many cities and states in the red. According to a late 2010 report from the National League of Cities, 87 percent of city finance officers nationwide say their cities were worse off in 2010 than in 2009. Financial pressures are forcing 79 percent of cities to lay off workers and 69 percent to delay or cancel capital infrastructure projects, the report says. Quincy officials say the data center building boom is helping them buck the trend. Real estate prices are rising, and tax revenue surged to $2.24 million last year, from $700,000 in 2005, according to City Administrator Tim Snead. Quincy recently spent $1 million on a new library and $75,000 for a new museum parking lot. It repaved 60 percent of the streets, bought a hook-and-ladder truck for the fire department, and erected an edifice for such services as the management of parks and water. The city, which boasts a population of 6,750, has cut property taxes for residents because there’s a larger base of tax payers in town, says Curt Morris, a commissioner at the Port of Quincy. “It’s been good for our little town,” he says. Morris says that Dell bought 80 acres for $3.6 million. “It’s drastically increased the assessed property value and has given money to the city, which has used it smartly to upgrade sewers, plants, and wire lines,” says Morris, whose family has lived in Quincy since the early 1900s. Grant County, where Quincy is located, is benefiting too. The value of the county’s land rose to $9.1 billion in 2011, from $4.6 billion in 2006. “Normally the county grows by about $500 million each year,” says Laure Grammer, Grant County assessor. “Because of all the new development, our county has been growing by over $1 billion each year.” Mounting Competition

The swelling coffers have yet to translate into lower joblessness for the city of Quincy. Its unemployment rate rose to 12.9 percent in January, from 8.8 percent in 2008, a byproduct of the recession and the loss of jobs during winter months, according to the Bureau of Labor Statistics.

Quincy also faces increasing competition for data center building projects from cities around the country. Virginia, Wyoming, New York, Missouri, and Iowa are among the states whose rural areas have attracted technology giants. Google (GOOG), Apple (AAPL) and Facebook have all broken ground in small towns in North Carolina. Washington’s biggest rivalry may lie in neighboring Oregon. Quincy lost out to Prineville, 287 miles to the south, to become the site of a data center for Facebook. As the world’s largest social network, Facebook needs more servers to store a growing number of photos, videos, and other information posted to user profile pages. Prineville had more alluring tax incentives, says Morris. Facebook declined to comment about its decision. To keep cities like Quincy from losing out in the future, the state approved a 15-month, 7.9 percent sales-tax break on any computing and power equipment that will be used there. Unlike many cities, Quincy doesn’t offer property tax breaks. Exchanging Tax Breaks for Jobs

Quincy also takes steps to ensure that data center building translates to more jobs. To receive a tax break, Dell, Sabey, Yahoo, and Microsoft had to agree to employ at least 35 people each from within the community at a living family wage, estimated by the Washington Research Council to be about $58,140. Companies are also attracted to Quincy by bargain real estate prices, plentiful fiber-optic network connections, and low-cost electricity produced by hydropower. For instance, electricity in Quincy costs 2.85¢ per kilowatt hour. By contrast, in Melville, a small town on Long Island, New York, that’s also the site of data centers, electricity costs 25.59¢ per kilowatt hour, according to a report last year by the Boyd Company, a consulting firm. Quincy has negotiated its hydroelectric power supply, which comes from the Columbia River, for the next 44 years. In 2008, renewable energy—much of it fueled by hydroelectricity—accounted for 77 percent of the energy in Washington state, according to an April Greenpeace report. North Carolina, by comparison, relied on coal for 61 percent of its energy in 2007, and in 2008 only 3.6 percent of its energy was renewable. Aside from Washington, the biggest green data center locale is Oregon, with 65 percent renewable energy from hydroelectric power, according to the report. Investing in Infrastructure

Quincy began as little more than a signpost on the Great Northern Railway in 1892 and was officially incorporated in March 1907. Morris’s grandfather endured the statewide drought of 1920 and 1921 and stayed on, even as many other residents left. Water finally flowed to Quincy in 1951, bringing irrigated farming to the area. Half a century later, in 2004, Quincy decided it wanted to bring development to the area, so it invested in infrastructure and made sure that areas were zoned properly. “We bought farmland and we put in roads, water, and power,” says Morris. Soon after, Microsoft bought 75 acres at an average of $13,000 an acre, he says. The city can issue a building permit in a six-week period, whereas some cities can take more than a year, he adds. Another milestone came in 2006, when Microsoft and Yahoo announced plans to build data centers in the area. Microsoft later expanded its operation. “A big piece was the renewable energy sourcing, primarily all hydro, and the cost of energy,” says Christian Belady, general manager of data-center advanced development at Microsoft, who says the company uses about 43 different criteria when locating data centers. “We had the land and the infrastructure. It was a natural place for us to put the expansion.” Microsoft, the world’s largest software maker, is based in Redmond, Wash., 160 miles away. Dell and Yahoo declined to comment on operations in Quincy. And while joblessness remains high for now, Quincy officials and some residents say they’re confident that higher receipts will mean more jobs in the future. For every job created in a data center, another is created indirectly in the community, according to a January 2010 report by the Washington Research Council. Construction workers in the area bring business to local restaurants, such as Zack’s Pizza and the Grainery, a sandwich store. Debbie Henne, owner of Rob’s Video, around the corner from City Hall, says she has noticed more construction workers coming in at night to rent videos. She has lived in Quincy her whole life and remembers a time when downtown businesses were thriving. She says she hopes to see that again.

Port of Quincy Approved for Inclusion in Foreign Trade Zone 203

Washington, D.C. / Moses Lake, Washington – The U.S. Foreign-Trade Zones Board recently issued Order No. 1764, which approves the reorganization and expansion of the Service Area of Foreign Trade Zone 203 under the “Alternative Site Framework” plan to now include the Port of Quincy and the greater Quincy, Washington area.


As a result of this order, companies or businesses wanting to locate in the Port of Quincy area can now get approved to use the FTZ in 30 days or less.


Foreign Trade Zones were created in the United States to provide special customs procedures to U.S. plants engaged in international trade-related activities. Duty-free treatment is accorded items that are processed in FTZs and then re-exported, and duty payment is deferred on items until they are brought out of the FTZ for sale in the U.S. market. This helps to offset customs advantages available to overseas producers who compete with domestic industry.


By now being included in FTZ 203, a company that locates within the Port of Quincy will be able realize the following benefits or advantages if it uses the FTZ program:

  • FTZs are considered to be outside of U.S. Customs Territory for the purpose of customs duty payment.
  • Goods entering FTZs are not subject to customs tariffs until the goods leave the zone and are formally entered into U.S. Customs Territory. Merchandise that is shipped to foreign countries from FTZs is exempt from duty payments. This provision is especially useful to firms that import components in order to manufacture finished products for export.
  • There is no time limit on goods stored inside a FTZ and certain foreign and domestic merchandise held in FTZs may be exempted from state and local inventory taxes. This allows firms to minimize their costs while their products are waiting to be shipped. In addition, quota restrictions are in some cases waived for items entering an FTZ.
  • A variety of activities can be conducted in an FTZ, including assembling, packaging, destroying, storing, cleaning, exhibiting, re-packing, distributing, sorting, grading, testing, labeling, repairing, combining with foreign or domestic content, or processing.


Quincy, Washington has become a leading small community in North America for attracting global companies such as Microsoft, ConAgra Foods, Yahoo, National Frozen Foods, Intuit, Quincy Foods (Norpac), Dell, Columbia Colstor International, Sabey, Stemilt, Oneonta, etc.


One of the key reasons that many companies are attracted to Quincy is because of the exceptional infrastructure, including: plentiful, low cost and green hydroelectric power; unsurpassed fiber optics availability and capacity; abundant supply of water; an ideal location on the Seattle-Chicago main line of the Burlington Northern Santa Fe (BNSF) Railway; and close proximity to Interstate 90 and the Ports of Seattle and Tacoma.


On a related note, the Port of Quincy also has a state-of-the-art intermodal terminal and rail cargo handling facility on the BNSF mainline. The Intermodal Terminal includes over 10,000 feet of track and a container maintenance and cleaning facility with nearly 1 million square feet of cold storage warehousing in close proximity to provide shippers with distribution, cross-dock and storage capacity in and out of the Washington state.


Additionally, the Port of Quincy Intermodal Terminal is home to the Pacific Northwest-Chicagoland Express “Cold Train” which recently celebrated its successful one-year anniversary (  The Cold Train’s success of shipping both inbound and outbound cargo has effectively turned the Port of Quincy Intermodal Terminal into a key distribution hub for the central Washington area.


Furthermore, a 2010 national site selection study which compared the cost of operating a manufacturing facility among 45 small market cities in the U.S., named Quincy, Washington “The Best in the West” (


Stated Port of Quincy Chair Curt Morris, “We are excited about the international trade and economic development benefits that are now available to businesses locating within the Port of Quincy as a result of being included in the Service Area of Foreign Trade Zone 203.  The FTZ status will now be able to serve sites or businesses located in the Quincy Port District through an expedited process.”

Vantage Data Centers begins construction of several phases in Quincy

Having emerged over the last year as one of the most aggressive data center developers in Silicon Valley, Vantage Data Centers, backed by technology-focused private equity firm Silver Lake Partners, has now set its sights on expanding into other prominent data center markets around the U.S.

Santa Clara, CA-based Vantage announced plans to purchase 63 acres in central Washington state for the development of nearly 500,000 square feet of enterprise data center space. The new campus will extend the company’s reach to Quincy, a relatively remote town more than 150 miles east of the Puget Sound, where Dell, Microsoft and Yahoo already maintain or are gearing up for new server farms.

Vantage will build out the project in several phases, starting with a 6 megawatt, one-story 133,000-square-foot center that has been fully leased to an undisclosed Fortune 100 technology company. Groundbreaking for the first phase began Oct. 15 with completion slated for August 2012.

Future phases of the Washington campus will include a 105,000-square-foot Enterprise Technology Center and capacity for an additional 235,000 square feet of data center space. The enterprise technology center will combine corporate office and data center space, with the office space housing up to 100 employees in executive offices, conference rooms and meeting areas.

The Quincy project, which follows the full lease up of available space at Vantage’s V2 campus in Santa Clara, CA, is the developer’s second campus after Santa Clara, where it is completing work on its third building and plans to begin bringing modules on line ahead of schedule before the end of the year.

Vantage selected Quincy as its second location primarily because of Grant County’s ample supply of hydroelectric power available from the Columbia River. In doing so, the company is tapping into a market described by some analysts as the most attractive for investors in all of commercial real estate at the moment.

With demand showing no signs of slowing, the U.S. data center market is expected to continue its aggressive growth rate as providers and users of data center space begin to benefit from thawing capital markets, resulting in higher deal volume following years of pent-up demand, according to Jones Lang LaSalle’s mid-2011 U.S. Data Center overview released this week.

Data center owners, developers and operators are expected to fund more so-called “white-floor” computer room space as capital flows into the market and data center users seek to take advantage of technological advances in blade servers, cloud offerings and virtual software solutions, JLL said — which happens to be the market that Vantage is aiming for.

Vantage hopes to differentiate itself from what Vice President of Marketing Greg Ness calls the traditional “one design fits all” approach to data center development as it competes in a field dominated by large publicly traded companies such as DuPont Fabros Technology Inc. (NYSE: DFT), CoreSite Realty Corp. (NYSE: COR) and Digital Realty Trust (NYSE: DLR). The company is looking for opportunities in all the top tier data center markets and some secondary markets, he said.

Vantage’s strategy has been to provide wholesale data center space that can easily be custom designed to meet clients’ specific data needs, with the company’s design engineers collaborating deeply with its customers’ engineering departments in developing the facilities.

As a developer of wholesale data centers, as opposed to colocation centers, Vantage leases buildings and space to companies that have their own IT teams and infrastructure, an approach that reduces operating costs and investment risks, Ness said.

In effect, Vantage outsources the physical building rather than the people and equipment, enabling it to leverage the expertise of people with experience building a lot of data center space. The user avoids tying up capital and generally gets a much more energy efficient, better-aligned data center than the customer could build itself, Ness said.

“Energy will continue to be one of the biggest market drivers. As power consumption in data centers continues to increase, users are increasingly concerned with power redundancy, capacity and cost,” according to Bo Bond, co-lead of Jones Lang LaSalle’s Data Center Solutions team.

While the “first-generation” wholesale space providers have been successful, an explosion of new devices connecting to networks with virtualization and cloud-type computing environments has resulted in more fluid conditions for IT departments, Ness claims.

“This has increased power and cooling requirements and driven enterprises to want to have more say over electrical, mechanical designs and features and other building attributes,” he said. “The standard buildings don’t align well if you view IT as strategic to your business.

“If you have certain types of applications and growth requirements, a one-design-fits-all architecture for your data center may not be satisfactory. As a matter of fact, it could be much more expensive in those types of building to get a space that’s customized to your type of environment. Data centers need to be tightly aligned with both the IT team and the CFO’s and COO’s priorities.”

“Jim Trout’s vision is that if we can build data centers in collaboration with the enterprise and give them exactly what they want and provide expertise, we can disrupt the category and create the wholesale data center company of the future,” Ness said.

Trout put the theory to the test in Santa Clara, one of the most competitive data center markets in the world. With backing from Silver Lake Partners, privately owned Vantage in 2010 acquired the 18-acre site in Santa Clara formerly owned by Intel Corp.

“For (Trout) to come in here and start taking deals right and left from these large public companies in the first 12 months of existence, it validates his vision that it’s time for the wholesale data center players to step up and customize their offerings to the needs of their clients, versus just giving them what space is available,” Ness said.

Industry talk about the deals and market share Vantage has won over established players has raised the company’s profile over the last year, in particular the lease up of the vertically scalable V2 facility in Santa Clara, taken by a single tenant in what is likely the largest lease of a wholesale data center in the history of the industry.

Vantage’s recent wins include lease signings by leaders in social networking, e-commerce, online gaming, cloud services and storage, web browsing and video game development. As a result, Vantage’s Santa Clara Campus is already 100% leased in its first two buildings, the 6-MW V3 facility which came online in January and is fully leased to four companies, and the 9-MW V2, which is occupied.

Sales will start soon for V1, the third Santa Clara data center building with 10MW and an additional 90,000 square feet of powered shell space coming online over the next two quarters.

“While the demand environment in Silicon Valley is clearly robust, this market is also one of the world’s most competitive,” Trout said. “We chose to launch Vantage in such an environment to prove that we could excel in a highly competitive marketplace with established players that have lost touch with critical innovations and enterprise requirements.

After having initial success in Silicon Valley, Vantage is confident it can bring the approach to virtually any data center market, Trout said.

Sabey Completes Its First Data Center in Quincy

Sabey Data Centers has completed the first facility on its Intergate.Quincy data center campus in Quincy, Washington, just seven months after commencing construction, the company said today.  The first tenant has occupied its space in the 139,000 square foot data center, the initial phase of what will be 520,000 square feet of space in Quincy. Sabey is currently working on tenant improvements for additional customer space.

The Intergate.Quincy campus has 60 megawatts of capacity of hydro-electric power priced at 2.25 cents per kWh, among the lowest-priced power in the nation. Intergate.Quincy is the sister campus to Intergate.Columbia, Sabey’s 430,000 square foot campus located near Wenatchee, Wash.

Building Continues in Quincy

The Sabey campus is the latest in a series of data center construction project in Quincy, a small town in central Washington that benefits from its cheap green power and a climate that’s ideal for fresh air cooling. Microsoft and Yahoorecently completed the first phases of major expansions in Quincy, while Dell and Vantage Data Centers have facilities under construction.

Construction on Intergate.Quincy began in time for the project to qualify for an exemption from Washington state sales tax (a rate of $.079 in Quincy) on purchases of servers and equipment. “Without the tax incentive, this business might have gone out of state,” said John Sabey, President of Sabey Data Centers. “Instead, everyone in the area is benefitting while keeping Washington State globally competitive.”

Sabey is also continuing to expand in multiple markets:

  • In Seattle, Sabey is continuing to build at Intergate.East, its flagship, 1.4 million square foot campus in Seattle. Its first “turnkey module,” SDC52, is fully leased and supports 4.5 megawatts of IT load. A second module, SDC42, will be ready for occupancy in December 2011.
  • In Northern Virginia, Sabey has begun construction on a 490,000 square foot data center campus in Ashburn, Virginia, one of the nation’s leading data center hubs.
  • Sabey has also entered the New York data center market, acquiring the majority interest in 375 Pearl Street for $120 million. Formerly a giant switching station for New York Telephone, the Intergate.Manhattan facility is being updated to install new infrastructure and capacity.

Sabey has more than 20 years of experience in the data center business and is perhaps the largest provider of hydro-powered facilities in the United States. Sabey’s current tenants include Microsoft Corporation, JP Morgan Chase, Savvis, Internap, VMware and T-Mobile.

Sabey Completes Its First Data Center in Quincy

Quincy rated as one of the top five areas in the world to build a new data center

Future data center expansion will be happening in developing markets like China, Brazil and Argentina, but such locations may not meet the requirements of data centers today and the requirements that will be necessary in the future. In fact, these five regions may not be the most obvious places to build a data center, but they might save your company a lot of expense.

Data center requirements have changed over the last 10-15 years. A decade or two ago, the two top criteria to consider when choosing a location were network accessibility and access to skilled talent. Fiber networks that connect data centers to the rest of the world were concentrated around metropolitan areas like New York City and San Francisco, but that is no longer the case. Sure, there will always be distance and latency concerns to consider, but the proliferation of high-speed network infrastructure means it is no longer the driving factor it once was. Additionally, data center talent was also limited to where the data centers were. That still holds true, except data centers have spread considerably and so has the skills base. In addition, remote monitoring and management solutions now make it possible for IT administrators to do most of their data center work remotely.

Today, largely because of remote access capabilities, data centers can be built anywhere in the world and be accessible from anywhere there is an Internet connection. As businesses have become more cost-conscious and more concerned about the environmental impact of technology, their data center location criteria have changed considerably. The top four key factors that need to be considered when choosing a data center’s physical location are:

  1. Access to power today and in the future. Power consumption is on the rise, and brownouts and blackouts are becoming more common in areas that have poor power infrastructure. Data centers require enormous amounts of power, and failures can cause unexpected downtime.
  2. Cooling and climate. Everything about a data center generates heat, and cooling the facilities can be expensive and challenging. Data centers built in cooler climates can reduce costs because outside air can be used to chill the data center.
  3. Proximity to risk. Data centers aren’t indestructible. Building them on fault lines, on flood plains, below sea level, or in the path of air traffic create unnecessary risk for the facility.
  4. Data security. Privacy concerns and compliance regulations require certain types of data (in particular, customers’ personal data) be stored within the region or nation that it’s collected. National legislation like the USA’s Patriot Act may also put data at risk because of the broad powers it grants governments for seizing corporate data. Political instability also causes concern regarding data security.

With these four criteria in mind, there are five regions that stand out as ideal locations for data centers:

Eastern Washington State

On the west coast is eastern Washington, which provides a good power infrastructure, plenty of skilled technology workers, and a tech-friendly environment that has been encouraged by technology vendors like Microsoft (headquartered east of Seattle in Redmond).