Huge Expansion Planned for Rackspace

Rackspace Managed Hosting will invest $100 million to convert a vacant San Antonio shopping mall into its headquarters, and plans to add 4,000 new employees over the next five years, according to plans unveiled this week. The state of Texas supplied a key sweetener in the form of a $22 million grant from the Texas Enterprise Fund, which the company said was a key consideration in its decision to remain in San Antonio, where Rackspace has been based since it was founded by three students at nearby Trinity College.

It wasn't immediately clear whether Rackspace's plans to convert the Windsor Park Mall into its headquarters would include any data center space. The mall, which has been vacant since its last anchor store departed in 2005, includes 747,386 square feet of space that at one time supported more than 100 stores.

In addition to the state grant for job creation, Rackspace is receiving a package of incentives from the city of Windcrest (which abuts San Antonio) including a 14-year tax abatement on the property. The city of San Antonio approved a boundary change to facilitate the deal. Under the outline of the propsed deal, Rackspace would move its 1,300 employees from its current headquarters on Datapoint Drive in San Antonio.

On May 23 the company announced $70 million in financing to support future hardware purchases and expansion of its data center network, which includes existing facilities in San Antonio, Dallas, Austin, northern Virginia and London. Rackspace had revenue of $75.2 million and positive net income in the first quarter of 2007, when it signed more than 900 new customers.