Data Centers in Tennessee

Tennessee – Central Location, Low Business Costs

Tennessee offers a compelling combination of low operational costs, significant tax incentives, and a central location that provides low-latency access to over 75% of the U.S. population. For businesses prioritizing budget predictability and wide market reach without requiring direct cloud on-ramps, the state provides a reliable and cost-effective environment for colocation and disaster recovery.

Tennessee: At A Glance

Network & Connectivity Ecosystem

Carrier Density & Carrier Neutrality: Tennessee supports a healthy and competitive connectivity market, with over 22 unique network service providers operating within the state as of September 2025. Major data center hubs in Nashville and Memphis offer access to numerous regional and national carriers, ensuring resilient, multi-homed network architectures.

Direct Cloud On-Ramps: As of September 2025, there are no public cloud on-ramps located directly within Tennessee. Businesses connect to major cloud providers via dedicated private network interconnects (PNI) or wavelength services to nearby primary hubs like Atlanta, GA, or Ashburn, VA. This model provides secure, high-performance access to all major cloud platforms.

Internet Exchange Points (IXPs): While public peering is limited within the state, most interconnection occurs through private peering arrangements inside carrier-neutral data centers. For public peering, operators typically connect to major exchanges in Atlanta, such as the Telx Internet Exchange (TIE), to optimize traffic routing.

Bare Metal: Bare metal server options are available from providers operating in Tennessee's data centers. Companies like Hivelocity offer dedicated server solutions for workloads requiring direct hardware access and consistent performance.

Power Analysis

Average Cost Of Power: Industrial electricity rates in Tennessee typically range from $0.07 to $0.09 per kWh, as of September 2025. These competitive prices, managed largely by the Tennessee Valley Authority (TVA), help lower total operational costs for high-density deployments.

Power Grid Reliability: The state's power grid is known for its stability, drawing from a highly diversified energy mix. As of 2023, the grid was powered by nuclear (48%), natural gas (~29%), coal (~11%), and hydroelectric (~10%). This diverse portfolio contributes to a reliable and well-engineered power infrastructure supporting major data center operations.

Market Access, Business & Tax Climate

Proximity To Key Business Districts: Data centers in Tennessee are strategically located to serve the state's primary economic centers. Facilities in the Nashville metro area support the vibrant healthcare, music, and entertainment industries, while those in Memphis provide critical infrastructure for logistics, distribution, and transportation giants like FedEx.

Regional Market Reach: From its central location, Tennessee offers excellent low-latency connectivity to a vast portion of the United States. It serves as an ideal hub for reaching markets across the Southeast, Midwest, and East Coast, making it a strong choice for disaster recovery sites and content delivery networks.

Tax Advantage For Data Centers: Tennessee provides significant, targeted tax incentives for data center operators and tenants. The state offers a sales tax exemption on the purchase of computer hardware, software, and other essential equipment for qualifying data center projects, which directly reduces capital expenditure.

Natural Disaster Risk

Tennessee has a high natural disaster risk profile, with a FEMA National Risk Index score of 79.70 as of September 2025. The risk is primarily driven by atmospheric and geological hazards rather than coastal threats.

Key risks include Tornado, Strong Wind, Hail, Riverine Flooding, Lightning, and Earthquake. Data centers in the region are purpose-built with structural reinforcements and resiliency measures to mitigate the impact of these potential events.