POWERING THE DIGITAL AGE
Data centers are the powerhouse of the digital age, fueling our ever-growing need for connectivity and data storage. As the industry expands at lightning speed, locations worldwide are vying for the chance to host these digital giants. Not only do they create numerous jobs during the construction phase, support high skilled employment during operations and refresh cycles, they also generate substantial tax revenue. Here are some considerations for examining the construction and operations impacts (always separately) of data centers in your region.
What this article covers
- Construction & Equipment Investments — how to accurately model the massive capital expenditures of building data centers, separating local construction impacts from specialized tech equipment purchases.
- Ongoing Operational Impacts — step-by-step guidance for analyzing daily operations in IMPLAN, including adjustments for high-wage employment and substantial electricity spending.
- Energy Demands & Environmental Trends — how to analyze the economic footprint of the power generation required to sustain data centers, while exploring their shift toward zero-carbon goals and advanced cooling technologies.
- Tax Implications & Regional Comparisons — strategies for projecting local and state tax revenues and using multi-regional analysis to compare economic benefits across different prospective sites.
- Tech Refresh Cycles — how to forecast the recurring economic impacts of replacing servers and IT equipment every 3 to 5 years.
HOW DO I MODEL CONSTRUCTION & INITIAL INVESTMENTS?
According to Business Insider’s reporting on a PwC report using IMPLAN, data centers contributed 4.7 million U.S. jobs in 2023. The majority of these jobs are in the construction industry supporting various trade workers as well as in the indirect and induced effects from the massive investments made.
The construction phase involves immense costs that employ local workers and can take anywhere from 1 to 5 years to complete. If you know construction will be spread across multiple years, check out the article Construction: Building Across Years. There's also the potential to see supply chain effects from the manufacturing of servers and other inputs to production if your region manufactures any of these inputs.
All the capital spending to build a new data center isn’t going into construction. The report using IMPLAN on Data Centers in Virginia completed by the Joint Legislative Audit and Review Commission (JLARC) estimates that the breakdown of capital spending to build a data center is 6% land acquisition, 6% other, 20% construction, and 68% computer and mechanical equipment. The Impact of Data Centers on the Nebraska Economy report completed by Mangum Economics using IMPLAN, estimates that 32% of capital expenditures are on construction and 68% are on equipment. Keep in mind that most equipment isn't made locally, so you might need to exclude this spending unless you know it can be sourced locally.
Start with an Industry Impact Analysis (Detailed) (IIA) Event Type using IMPLAN Industry 50 - Construction of new commercial structures. Business Insider noted that many of the construction jobs make wages far higher than the average - even double - so if there is any information on how many employees will be hired and their wages, be sure to add that in your analysis. As this industry represents far more than just data centers, customization of the spending pattern can be useful if you have additional data on specific spending by line item.
As an example, let’s say IMPLAN is building a $1B data center called the IMPLAN Data Ranch. Of that, we will assume that 20% of the cost is in the actual construction and 68% is in computer equipment. Start with an IIA Event in Industry 50 - Construction of new commercial structures and enter $200M in Total Output. Then we will add a second IIA in Industry 287 - Electronic computer manufacturing, which is the industry that manufactures servers of $680M in Total Output. As this analysis is at the U.S. level, it is more likely that these purchases will be made in the nation.
Both of these Events are added to the 2025 Data Year.
| Step | IMPLAN Event Setup | Modeling Guidance |
|---|---|---|
| 1. Separate CapEx | Pre-Analysis Allocation | Unbundle total budget. Typically, 20%–32% is physical construction and 68% is equipment/servers. Exclude land acquisition and non-local equipment purchases. |
| 2. Model Construction |
IIA Event: Industry 50 (Construction of new commercial structures) |
Enter the construction portion of CapEx as Total Output. If known, add higher construction wage/employee counts or customize spending patterns for specialized trade inputs. |
| 3. Model Equipment |
IIA Event: Industry 287 (Electronic computer manufacturing) |
Enter server/equipment portion as Total Output. Note: Only include this step if manufacturing occurs within your regional study area (e.g., U.S.-level analyses). |
| 4. Multi-Year Buildout | Group & Dollar Year Adjustments | If construction spans 1 to 5 years, separate events across distinct Groups assigned to their respective construction years to account for temporal effects. |
HOW DO I CUSTOMIZE THE SPENDING PATTERN?
If you have specific, line-item budget data for a data center project, you can customize the spending pattern within an Industry Impact Analysis (Detailed) Event for greater precision. Standard benchmark industries, such as Industry 50 (Construction of new commercial structures) or Industry 46 (Construction of new manufacturing structures), provide a strong starting baseline that you can tailor to match your unique construction inputs..
For example, suppose we take Industry 46 as our benchmark, but we know that certain commodities take up a larger share of the infrastructure construction for data centers. We can modify the spending pattern to reflect the heavy electrical and mechanical demands unique to data centers.
Depending on the level of detail in your data, you can customize the spending pattern in one of two ways:
Targeted Adjustments: Update specific high-impact commodity shares (such as electrical or HVAC equipment) while keeping the remaining baseline distribution intact.
Full Overhaul: Replace the entire spending pattern with your own itemized expenditure data.
Note: After making any manual adjustments, select Normalize from the menu. This rebalances the spending pattern so the sum of all commodity proportions equals 100%.
If we think we would be using this newer data in future projects, we might want to save it as a new industry spending pattern that we may want to use in future projects.
The newly saved spending pattern can be used in any project with the Industry Impact Analysis (Custom). The saved custom spending pattern, 46B - Construction of data centers, will be an available Event Specification.
HOW DO I MODEL DATA CENTER OPERATIONS?
To analyze the operations, create another Industry Impact Analysis (Detailed) Event Type in IMPLAN Industry 418 - Data processing, hosting, and related services. Run total operations spending as Output and add in any other known information you may have like Total Employment or Employee Compensation. While data centers employ fewer people during operations, the jobs tend to be higher paying according to the JLARC report. As data centers are huge consumers of energy, you might consider changing the Spending Pattern on IMPLAN Commodity 3042 - Electricity transmission and distribution to 40% as the JLARC report. Don't forget to normalize the Spending Pattern.
The fictitious IMPLAN Data Ranch will have 50 employees with a fully loaded payroll of $100K each. As there are no new Proprietors in this scenario, add a zero for Proprietor Employment and Proprietor Income.
Also, they will spend approximately 40% of their total spending on goods and services on energy. Clicking on the Spending Pattern, allows you to make edits to the Commodities that this Industry purchases. Change the percentage for Commodity 3042 to 40%, click the three dots in the upper right, click normalize, and save.
As the operations won’t happen in the same year as the construction, create a second Group for the United States and change the Dollar Year to 2026, when the facility will open for business. Drag the operations Event into this new Group.
Now click Run.
Use the filters to select the US 2025 Group which consists of just the construction and server purchases. We see that the investment here of $880M in these two Industries leads to a Total Output Impact of $2.2B for a multiplier of 3.2. The Direct Employment of 1,638 and the Total Employment of 6,738 gives us a multiplier of 4.1.
Filtering for the Group Name US 2026 which just has the operations, shows the Direct Employment of 50 supports a Total Employment Impact of 122 for a multiplier of 2.4. The Direct Output of $13.5M yields a Total Output Impact of $32.7M also gives a multiplier of 2.4.
| Step | IMPLAN Event Setup | Modeling Guidance |
|---|---|---|
| 1. Model Operations |
IIA Event: Industry 418 (Data processing, hosting, and related services) |
Enter total operations spending as Output. Add any known details like Total Employment or Employee Compensation to account for higher-paying data center jobs. Add zero for Proprietor Employment and Proprietor Income if applicable. |
| 2. Customize Spending Pattern | Commodity 3042 (Electricity transmission and distribution) | Because data centers are massive energy consumers, adjust the spending pattern for electricity. For example, change Commodity 3042 to 40%. Crucial: Always click the three dots and select Normalize after making edits. |
| 3. Adjust Timing | Group & Dollar Year Adjustments | Operations occur after construction is complete. Create a new Group and change the Dollar Year to reflect the facility's opening year (e.g., 2026). Drag the operations Event into this new Group. |
| 4. Run & Analyze | Filters & Results | Click Run. Use the Group Name filter on the Results page to isolate and analyze the operational impacts separately from the construction phase. |
TAX IMPLICATIONS
A project the size of the IMPLAN Data Ranch will obviously be seeking a tax credit. Popping over to the Tax Dashboard on the Results page shows the details on how much revenue will be brought in by each taxing level of government. Again setting the filter to just the US 2025 Group, we can see that whatever state is lucky enough to land this amazing project will see almost $50M in state taxes!
ENERGY DEMANDS
As mentioned previously, data centers are enormous consumers of energy. So much so that large-scale deals are being secured to ensure that there is enough supply to meet their demands. Constellation Energy is planning to reopen the Three Mile Island nuclear plant in Pennsylvania to power Microsoft’s data center needs. This new demand can also be analyzed in IMPLAN. If we assume the plant will have 1,000 jobs, we can add another IIA Event in Industry 36 - Electric power generation - Nuclear.
This investment is not only necessary to supply the needs of the data centers, but itself is also an economic giant supporting over 5,000 jobs and $2.5B in output.
ENVIRONMENTAL IMPACT
Data Centers are known to draw on energy and water and there is concern about their environmental impact. Despite a temporary rise in greenhouse gas emissions per dollar of output between IMPLAN’s 2019 and 2023 environmental releases, the latest data shows a promising downward trend. This indicates that investments in clean energy and efficiency are beginning to yield positive results. Also, data centers have completely eliminated direct water use between IMPLAN’s 2019 and 2023 environmental releases. This showcases their leadership in adopting innovative, water-smart cooling and operational strategies. Data centers are making significant strides in adapting to advanced cooling technologies, such as liquid cooling. This method efficiently dissipates heat from components, offering better heat management compared to traditional air-cooling methods. This is particularly beneficial for water-scarce sites. Major players in data center and cloud operations are committed to zero carbon goals and are leveraging machine learning to optimize their efficiency in terms of energy and water usage. Overall, these advancements highlight a positive trajectory towards sustainability and efficiency in the data center industry.
REFRESH CYCLES
As with any technology, it doesn’t last long. Colocation America estimates that servers are replaced every 3-5 years. If your region is lucky enough to manufacture them, the stream for business is strong. Looking out three years, another Event could be added for a replacement of all the servers using a new Group for Dollar Year 2029.
A NOTE ON REGIONALITY
At the U.S. level we are seeing the average across all states and DC. When a company is looking at such a large location decision, they might court a few cities and states. In IMPLAN, you can set up multiple Regions to compare the overall economic impact and fiscal benefits between places to inform not only the data center ownership, but also the local, regional, and state governments of the potential boon to their economies. Additionally, using MRIO can capture the relationships between multiple Regions and even every state in the U.S.
FINAL THOUGHTS
Understanding the economic impact of data centers is crucial because these digital powerhouses are not just about storing and processing data; they are significant drivers of economic growth, the key to the future of business, and learning the latest tiktok trends. From creating high-paying jobs and stimulating local economies during construction to generating substantial tax revenues and fostering innovation, data centers play a pivotal role in modern economies. By analyzing their economic impact, we can make informed decisions that maximize their benefits, ensure sustainable development, and harness their full potential to power our digital future.
RELATED ARTICLES
Construction: Building the Analysis
Construction: Building Across Years
Written April 22, 2025
Updated August 13, 2026