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17th of November 2018

Economy



Apple boosts land holdings to more than 7,000 acres

Apple has almost tripled the amount of land it owns over the past two years, as the company makes purchases of vast tracts across the US for data centres and solar farms that can also help secure lucrative tax breaks. 

The iPhone maker’s annual report, published this week, revealed that Apple owns 7,376 acres of land, up from 4,928 last year and 2,583 in 2016. In 2011 it owned just 584 acres, older filings show. 

The land, which is equivalent to more than 11.5 square miles, an area greater than Apple’s home town of Cupertino, is listed as being in addition to the 40.8m sq ft of building space that Apple owns or leases for its offices and retail stores. 

Apple’s annual report filing states that it owns “facilities and land for corporate functions, R&D and data centres at various locations throughout the US”. 

While analysts have speculated that the land, much more than Apple would need for its current corporate activities, might be earmarked for new US manufacturing facilities, or private testing tracks for its autonomous cars in remote areas such as Arizona, a large slice of Apple’s property is already given over to vast data centres. 

The huge expansion of those facilities underpins its growing range of online services, a key focus for the company as the smartphone market slows. 

Far from Silicon Valley, in states such as Iowa, Nevada and North Carolina, Apple has been investing billions of dollars to build out server farms to run its iMessage, App Store, Apple Music or iCloud services. It has also stepped up its investment in renewable energy sources, such as solar farms, to power those facilities. 

Increasingly, Apple is deciding to buy rather than lease the land underneath its data centres and solar farms. These capital-intensive facilities must be sited in geologically stable areas that are close enough to customers to ensure speedy delivery of online services. 

40.8m

The square footage of building space that Apple owns or leases for its offices and retail stores

Rich tech companies such as Apple, Amazon, Facebook and Google also face other considerations when deciding where to build their data centres. Many cities are eager to entice them with tax breaks and “abatements”, such as lower rates of sales and property tax. 

Incentives from tax-friendly locations such as Maiden, North Carolina, or Reno, Nevada will together be worth hundreds of millions of dollars to Apple if it remains in those communities for two or three decades. In Iowa alone, the company has bought about 2,000 acres for new data centres close to Des Moines where it stands to benefit from more than $200m of subsidies. 

While tech companies promise data centres will bring new revenues, jobs and follow-on investment to their local communities, the size of those incentives remains controversial. Amazon has been criticised, during its search for a so-called HQ2, for extracting promises of billions of dollars in tax breaks and other benefits from cities across the US. 

“For the average company in America, the biggest tax they pay is property tax,” said Greg LeRoy, executive director of Good Jobs First, an advocacy group. “To the extent that Apple is now bulking up on real estate, those abatements matter a lot.” 

In 2012, the Nevada governor’s office granted Apple tens of millions of dollars worth of tax abatements in return for its initial $400m investment in a data centre in Reno. The facility was billed as creating just 35 new jobs, according to records on the state governor’s office of economic development. 

“We think it’s crazy to subsidise these places so massively when they are creating so few jobs,” Mr LeRoy said. Good Jobs First estimates that Apple stands to benefit from around $700m in state and local subsidies over the coming decades.

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Nonetheless, after that initial investment in Reno in 2012, Apple has expanded its data centre there, subsequently investing more than $1bn further and employing dozens more people at the facility. Brian Sandoval, Nevada’s outgoing governor, has credited Apple’s arrival in the area with an economic boost that ultimately added hundreds of thousands of jobs across the state. 

Apple says that data centres are just one part of its role as a “powerful engine of growth in the US” that supports 2m jobs across the country. Developers whose apps are sold through its App Store infrastructure have made more than $16bn since its launch in 2008. 

“We’re investing billions of dollars in state of the art, environmentally friendly data centres to power the App Store and other services, including iMessage, FaceTime and Siri,” Apple said. “Our investment creates hundreds of local construction jobs across states where we’re expanding and we work closely with local and state leaders as we develop our long-term investment plans.”

Like Amazon, Apple is also on the hunt for a new campus to build somewhere in the US, in addition to the 175-acre Apple Park that has been home to many of its employees since last year. Apple announced the new campus in January as part of a pledge to make a $350bn “direct contribution” to the US economy over the next five years. Some $10bn of that investment will be made in its data centres, Apple said. 

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