Atlanta is the new leader in the amount of space leased compared to the amount vacated, achieving 705.8 megawatts of positive net absorption in 2024, according to the firm’s North American data center trends report.

Last year, Atlanta absorbed nearly 39 times more space than at year-end 2023 (18 MW). The market recorded the highest volume of colocation leasing activity ever, spurred by GPU-as-a-Service tenants.

GPUaaS is a cloud-based service that allows on-demand access to high-performance graphics processing units, or GPUs.

A colocation data center facility allows businesses to rent space to house their servers, networking equipment and storage devices. It will enable them to place their hardware in a third-party data center while maintaining ownership and control over their equipment, unlike a cloud service where the provider owns the infrastructure.

Astounding numbers

The data center inventory numbers in the Atlanta market are astounding. Last year, it increased by 222 percent to 1,000.4 MW as the market accommodated demand by ramping up data center space under construction.

In the year’s second half, the market saw 2,159.3 MW under construction, representing a 195 percent annual increase in under-construction totals. That tops the eight primary North American data center markets in CBRE’s report.

As for new developments in the market, AWS plans to invest $11 billion in new data center development. Meanwhile, Lincoln Property Co.’s acquisition of a DXC data center shows it plans to redevelop it into a 30 MW colocation facility.

Ryan Mallory, Flexential’s COO, told Commercial Property Executive that Atlanta is emerging as the new “data center alley.”

GA Power/Southern Co. recently brought the Vogtle reactors online, delivering approximately 4GW of power capacity and unlocking significant development potential, Mallory said.

READ ALSO: Data Center Demand Keeps Surging Despite Challenges

“Additionally, Georgia has implemented robust sales tax incentives to attract high-paying jobs to communities hosting data centers,” he added. “This powerful combination of abundant power, available land and supportive communities has firmly placed Georgia on the technology map.”

However, Georgia is not the only market experiencing this surge.

In Texas, markets such as Dallas-Fort Worth, Austin and San Antonio have grown remarkably in the past 24 months, according to Mallory.

“These cities benefit from reliable power, a favorable tax environment, a high-quality workforce and communities that welcome the data center industry—a sector known for its high-paying, low-impact nature,” he said.

Overall, the exceptional quality of the product and the availability of land and power differentiate the U.S. market, Mallory added. “With historically high-growth regions slowing or pausing data center development, there has never been a better time to be in the data center business in North America.”

CBRE said tax incentives, available land and greater power accessibility make markets such as Charlotte, Northern Louisiana and Indiana potential growth areas for hyperscale and colocation providers.

This, despite some saying that Deep Seek might curb data center demand.

As for investment, CBRE reported that the average sale price increased year-over-year. Eleven asset sale transactions exceeded $90 million, while five surpassed $400 million.

AI impacts data center project locations

“As the demand for data centers has increased significantly, we have seen a shift in where these projects are being developed,” Todd Johnson, director of real estate development at Ryan Cos., told CPE.

“Traditionally, data centers were situated near metropolitan areas to minimize latency, but newer AI models have reduced the need for this proximity. Now, data centers are being developed in more remote locations where there is ample power supply.”

Seeking more energy

Avison Young’s data center market report for the fourth quarter of 2024 indicates that data center inventory continues to hit record highs in the U.S., with commissioned colocation power expanding nearly 50 percent over the previous 12 months. Yet, vacancy rates remain at historic lows, at just 1.6 percent.

In 2024, CBRE stated that North America doubled the data center supply under construction compared to the previous year to a record 6,350.1 megawatts. This is a 12-fold increase from the 456.8 MW under construction in 2020.

Given this growth, the energy needed to power these assets has become a focus.

As power generation and transmission timelines continue to stretch with rising demand, more data center developers are considering self-generation as a temporary supplement or a long-term solution, according to Howard Huang, a market intelligence analyst with Avison Young.

“Natural gas is gaining traction due to its abundance, affordability and faster deployment compared to waiting on grid transmission while sidestepping many of the limitations of solar and wind.”

Andrew Batson, head of U.S. Data Center Research for JLL, told CPE that the North American data center market reached unprecedented demand levels in 2024, with vacancy rates plummeting to record lows amid insatiable tenant demand and limited supply.

JLL’s research found that most markets have doubled or tripled since 2020.

“Power availability remains the primary challenge, with average wait times for grid connections extending to four years in most markets,” Batson said.

“As a result, data center development is expanding into new territories in search of power, with emerging markets seeing increased activity. In 2024, AI represented about 15 percent of data center workloads; by 2030, it could grow to 40 percent. AI will be a key source of growth for the sector.”

The post This Market Tops the Nation for Data Center Absorption appeared first on Commercial Property Executive.

The significant financing deal comes as the AI data center demand grows. In January, J.P. Morgan provided a $2.3 billion loan to the joint venture of Blue Owl Capital, Crusoe Energy Systems and Primary Digital Infrastructure for the development of a build-to-suit data center project in Abilene, Texas. The campus will be designed, developed and operated by Crusoe.

Novva’s Salt Lake City campus, up close

Construction of the second phase at Novva’s Salt Lake City campus began in December 2023 and is slated for completion in 2026. Phase 3 construction began in January 2024 and is also expected to deliver by 2026. Both phases will feature 318,000-square-foot data centers and each will have the capacity to produce 72 megawatts of critical IT load.

The 175 megawatt campus, which will span about 1 million square feet when completed, was fully leased in 2023 to a leading global tech company. The first phase began operations in 2023 and has the ability to operate without water year-round and cool with ambient air. When fully operational, the complex is expected to consume approximately 84 percent less water than similar data centers in the region.

READ ALSO: From Data Center YIMBY to NIMBY?

The project is taking shape at 6477 Wells Park Road, roughly 18 miles from Salt Lake City International Airport and 22 miles from downtown Salt Lake City. The property has access to four long-haul fiber routes and includes a 200 megawatt substation with N+1 redundancy.

The location is attractive for data center operations because it offers low-cost power, low disaster risk, low latency, no sales tax on equipment purchases and a high-altitude cold desert climate, Novva CEO Wes Swenson said in prepared remarks.

J.P. Morgan acted as lead arranger and Starwood Property Trust acted as arranger for the financing. Simpson Thacher & Bartlett LLP served as legal counsel for CIM Group and Novva Data Centers.

Data center growth

The Salt Lake City property is Novva’s flagship. The firm also operates data centers in Colorado Springs, Colo., and Las Vegas. Other developments will come online in Reno, Nev., San Francisco and Mesa, Ariz.

Novva announced plans for the Mesa campus in August 2024. The company is expected to invest more than $3 billion over the next decade on the 160-acre property marking its first foray into Arizona. The first phase will have 96 megawatts of capacity and is slated for completion in late 2026.

The post CIM, Novva Land $2B for Data Center Development appeared first on Commercial Property Executive.

Over the last decade, state and local governments have welcomed data centers with open arms by creating massive subsidies and tax incentives for them. According to NAIOP, 36 states currently offer incentives for data centers as a way of boosting their economies and increasing their tax bases.

But a recent surge in data center development to meet the ever-growing demand for capacity is putting a strain on power supply and infrastructure, causing some jurisdictions to question the benefits of these projects and the stimulus packages they’ve been offering. Some are even passing legislation designed to slow down the frenetic pace of development.

READ ALSO: Why SoCal Industrial Continues to Present Opportunities

The lure of data centers

Major data center hubs—such as Northern Virginia, the Dallas-Fort Worth metroplex, Atlanta, Phoenix and Chicago—owe their existence to some level of incentives and efforts by local governments to embrace data center development.

“Government support and community interest—or outright opposition—can vary greatly even within specific metros,” said Todd Smith, chief technology officer for Transwestern’s technology properties group tenant advisory practice. “You will tend to see data centers clustered in certain areas for this reason, as well as available infrastructure and utilities.”  

Every state and city wants new job growth and tax-dollar injection into the local economy, commented Sean Farney, vice president of Data Center Strategy at JLL. “And data centers bring both, as hundreds of tradespeople are required to build these facilities, and data center companies spend hundreds of millions of dollars during the build cycle,” he said.

Farney contended that states with pro-data center policies that streamline the build and procurement process have thrived. For example, Illinois attracted billions of dollars of investment after successfully crafting a set of tax incentives for data center development. Iowa adopted a state-wide renewable energy policy some years ago, which ended up attracting billions of dollars in data center investment funding, with Microsoft and Google both establishing large hubs there, he continued. 

In Northern Virginia, which has the capacity to provide abundant power for more than a decade, local governments appointed officials to head data center development coordination efforts, Farney noted, and ”the industry loved having a cooperative partner.”

To accommodate developers, San Antonio provided a low-cost cooling system for data centers using gray water.

Data center boom sets off alarm bells

Data centers worldwide already consume about 4 percent of the world’s electricity, according to a report from Data Center Knowledge. Usage by U.S. data centers is expected to triple by 2028, accounting for up to 12 percent of the nation’s power usage.

In addition to concerns about energy and water consumption, state and local governments also worry that the increased demand could jeopardize their carbon dioxide reduction goals by potentially forcing utilities to increase dependence on fossil fuels.

A 2016 study by Good Jobs First, a nonprofit watchdog group that tracks economic development incentives, found that nationwide, data center subsidies were costing state and local governments about $2 million per job created, a figure the report’s author, Kasia Tarczynska, said has ballooned in recent years. 

As a result, state incentives may come with requirements, such as job-creation thresholds. In Nevada, for example, to qualify for a 10-year tax abatement, a data center must create 10 new jobs, and a 20-year abatement requires 50 jobs. Some states also require that jobs created cannot be subject to workforce reductions for a specific time period.

To create goodwill among city leaders and residents, data center developers will throw in some amenities at their expense. “Oftentimes, a developer will directly contribute locally by building a new water main, establishing new parks, providing technology education and training, and even donating software,” Farney said, noting that in municipalities with limited natural resources like water, data center operators have designed low- or no-water facilities.

New regulations may slow development

The backlash over energy usage and other concerns has also prompted state and local governments to implement new data-center-specific regulations and zoning changes or pull the plug on incentives to slow or limit new development.

Last month, for example, the Virginia State Senate passed a bill that requires data center permit applicants to provide a study of the project’s impact on water, agriculture, parks, registered historic sites and land where the data center would be located. If located within 500 feet of a school or in a residential area, the applicant must provide a detailed profile of the project’s design and impact on its neighbors.

The state’s lawmakers also have proposed bills that would limit any construction or infrastructure costs from being passed on to consumers and offer tax credits to commercial facilities that meet certain energy efficiency standards.

Two communities in Northern Virginia have also responded to resident complaints about the size of and noise from data centers. Prince William County increased its tax rate on the equipment inside data centers by 72 percent. Neighboring Loudoun County made all data center projects subject to review by the county board, a move to keep these projects away from residential areas and certain commercial zones. Additionally, Fairfax County recently banned data centers within a mile of rail stations. 

Arizona, Illinois and Arkansas officials have passed laws to either suspend data center development or further restrict where they can be built, reported Stateline. As part of a broader energy bill, South Carolina lawmakers concerned about rising electricity demand are considering pulling the plug on discounted power rates for data centers. 

Bills under consideration in Georgia, California and Virginia would place more of the costs for improving data center infrastructure on developers rather than being borne by taxpayers, according to Politico’s E&E News.

It also reported that Texas lawmakers are considering a bill that would raise power costs for data centers and potentially force them to power off during a grid emergency. This legislation was proposed in response to power regulators warning that the Electric Reliability Council of Texas grid will need to double its power generation capacity by 2030 to meet booming demand.

Additionally, Georgia passed legislation that placed a two-year moratorium on tax incentives allotted to data centers, but it was vetoed by Gov. Brian Kemp at the urging of the Data Center Coalition, a trade group representing tech giants, including Amazon, Google and Meta.

The Atlanta City Council, however, recently banned data center development in the CBD near transit hubs and the Beltline, citing a need to prioritize housing, retail and public spaces. This action canceled a 300,000-square-foot data center development proposed near the Five Points MARTA rail station and Underground Atlanta.

Data center developers and investors sometimes face challenges in certain regions of the country, particularly near population centers where there is competition for limited available land, noted David Ferdman, managing director at Primary Digital Infrastructure, which provides flexible financing solutions for data centers.

“By leveraging the existing (asset) surroundings, data center developers can (often) address key challenges related to electricity, water and competition for land, while ensuring that the facilities are positioned for sustainable growth,” he said.

Federal deregulation to benefit data centers

While some markets like Northern Virginia are pulling back support for more data center development, Smith said, markets like Texas and Alberta are embracing more investment in this sector, including the enablement of major natural gas production. 

Smith noted that use of natural gas, which does include some level of carbon emissions, is paramount in meeting growing power demand. Support from the Trump Administration in the form of relaxed rules around emissions will also be useful in bringing new projects online. 

President Donald Trump has already announced that Damac Properties, which is controlled by Emirati billionaire Hussain Sajwani, will invest $20 billion in data center development across a number of states, including Texas, Arizona, Oklahoma, Louisiana, Ohio, Illinois, Michigan and Indiana.

Smith noted that public or private support for co-locating energy generation on-site will be helpful in both reducing the strain on public power grids and CO2 emissions targets.

In an effort to support AI development, President Joe Biden opened federal lands to data center developers and offered them expedited permitting. But this was a nonstarter, Farney said, because the opportunity to develop on federal lands is contingent on using geothermal energy, a technology that does not scale to the commonplace gigawatt campus sizes.   

“The new administration’s approach is more open market, starting with the thesis that AI is strategic to U.S. interests and that leadership must be maintained via reduced constraints on digital infrastructure deployment,” Farney continued.   

The Trump Administration recently announced U.S. government investment in a $500 billion public/private alliance called Stargate. Touted as a means to secure America’s AI future, this joint venture—which is backed by OpenAI, Oracle and investors SoftBank and MGX—was formed to build advanced data centers across Texas and beyond. It comes with an initial $100 billion commitment and brings together a collaboration key technology partners, including ARM, Microsoft and NVIDIA.

Big tech takes action to thwart more regulation

To overcome regulatory challenges, data center developers and hyperscalers—including Microsoft, Amazon, Oracle, Google and Meta—are increasingly co-locating privately owned power production facilities on-site or near data centers. They are also stepping up their move to nuclear energy to meet their own ESG goals, which Farney noted are often are more stringent than government mandates.

Microsoft, for example, is repositioning Pennsylvania’s Three Mile Island defunct nuclear reactor to meet its power requirements in that region, while other Big Tech users are embracing small modular reactors, a new technology that will co-locate small, privately operated nuclear reactors on data center sites.  

Despite the growing pains being felt by data center companies and jurisdictions, Farney believes that data centers maintain their appeal.

“If data is the currency of the 21st century, then data centers are the banks protecting this valuable commodity,” Farney commented. “When you look at the positives—increased tax revenues, more jobs, training programs, lower utility rates due to subsidies, improved infrastructure, and better-performing digital services—it’s hard (for local governments) not to like data centers.”

The post From Data Center YIMBY to NIMBY? appeared first on Commercial Property Executive.

Principal Financial Group has closed a $3.6 billion fund dedicated to hyperscale data center developments across the U.S. The firm’s investment management unit, Principal Asset Management, controls the oversubscribed fund.

The vehicle is projected to capitalize more than $8 billion in assets. Principal’s development partner is Stream Data Centers.

Last June, Stream broke ground on a $400 million, five-building AI-ready data center campus in San Antonio. The first building is expected to be ready for occupancy in the second quarter of this year.

Principal Asset Management’s dedicated real estate investment arm is Principal Real Estate, which has been an active player in the data center sector since 2007. It has $11 billion in active developments and assets under management.

READ ALSO: Are Data Centers Immune to CRE Market Forces?

Principal’s new fund comes as a response to increasing demand for additional digital infrastructure. Alongside with new records in construction activity in the sector, the data center market will struggle with tighter vacancy rates and higher competition for land and resources, according to a recent CBRE outlook.

Investor interest in data centers to continue growing

Last week, American Real Estate Partners closed its fourth real estate GP fund with $309 million in equity commitments. Dubbed AREP Strategic Opportunity Fund IV, it is the company’s largest investment vehicle and will be focused on data centers and residential. AREP plans to allocate 80 percent of these funds for the expansion of its data center platform, PowerHouse.

A recent DLA Piper real estate report shows that investor interest in industrial assets declined in 2024, in favor of data centers. With more than 950 purchase and sale transactions and more than 500 property management agreements analyzed, the company noted that in 2020 and 2021, none of its clients were acquiring data centers. By 2023 data center deals reached a 4 percent share, while at the end of last year, the figure jumped to 9 percent—the steepest increase out of any real estate sector.

The post Principal Closes $3.6B Data Center Fund appeared first on Commercial Property Executive.

Demographics, deglobalization, digitization and decarbonization—four trends described by panelists at a CBRE Investment Management press conference as underlining any worthwhile investment during what many perceive to be the dawn of a new investment cycle.

These views lie in the backdrop of what Wei Luo, the company’s global research director highlighted as “sticky interest rates and higher for longer inflation.” Like many of its peers, the firm predicts two rate cuts this year, in the realm of 50 basis points.

Beyond the monetary realm, policy is a little less clear cut. Trump Administration tariffs against key trading partners could potentially increase demand for domestic manufacturing, though Luo sees these more as “starting points for negotiations” with Mexico, China, Canada and the European Union, and not persisting long-term.

Immigration, on the other hand, has led the firm to favor investing in real estate and infrastructure within metros experiencing more domestic than international in-migration. These are predominantly located in the Sun Belt. “We’re focused on the next Phoenix, Dallas or Nashville, Tenn.,” Luo said.

Sometimes, boring is better

As for how the economy and politics affect commercial real estate investing at the asset class level, panelists highlighted a shift from buying into historically appealing yet currently struggling sectors such as office to more trend-resistant, in-demand property types including modern industrial, health care, data centers and workforce housing.

The goal here is to be more resilient to the economy’s here-to-stay struggles and geopolitical uncertainty, all the while serving as a provider of liquidity. Bernie McNamara, the firm’s head of client solutions, labeled modern logistics as an example of this resilience, having experienced a “robust recovery” in 2024, following the industry’s lowest capital raising year since 2012. It’s also a provider of liquidity in a “liquidity-constrained market,” McNamara said.

READ ALSO: Industrial Report: Sector Transitions as Supply Shrinks

With these projects comes a need for infrastructure used to support them. What Robert Shaw, managing director of private infrastructure strategies refers to as a “boring” investor class is really just the electricity needed to power data centers, electric vehicle charging stations and industrial facilities. According to Grid Strategies, a power sector consulting firm, demand for electricity in general is projected to grow by 16 percent over the next five years. Houston’s CenterPoint energy, for example, experienced a 700 percent increase in its data center connection request queue in October.

Growth sectors of the future

Equally important to a resilient portfolio is a diversified one. Adopting a similar mindset to the infrastructure-dependent sectors, CBRE Investment Management has also taken a look at areas that rely on the physical presence of people; these include essential retail, health-care properties, self storage student housing, as well as market-rate and workforce housing. “These are the next-generation growth sectors,” said Lucy Fletcher, a fund manager with the firm’s indirect private real estate practice. “It’s about the opportunity to diversify across sectors and geographies.”

And investors may have less difficulty in actually picking some properties up, given a steep narrowing of bid-ask spreads, which reduced by an average of 17 percent in the first two weeks of this year, according to data from Market Axess. Many of the above properties, especially if they are acquired as part of a core investment strategy, “have durable cash flows at an attractive price,” despite capital declines of 20 to 30 percent in North America, said Liz Troni, a portfolio manager.

The post CBRE IM Panel Talks Next Generation of CRE Investing appeared first on Commercial Property Executive.

AREP stated that the amount reflects “significant growth” since it closed fundraising for its third investment fund, in 2022. Fund IV is AREP’s largest fund to date and relied in particular on institutional investors and high-net-worth individuals.

The new fund will focus on what AREP sees as “transformative opportunities in high-demand sectors,” mainly data centers and residential real estate—and predominantly the former. AREP intends to allocate 80 percent of Fund IV to expanding PowerHouse, AREP’s data center platform, to capitalize on the ever-growing demand for digital infrastructure.

This emphasis builds on a transition from office buildings into data infrastructure that AREP began around 2016, with its reported $212 million acquisition from Verizon of the 136-acre Quantum Park, in Ashburn, Va.

READ ALSO: Is the DeepSeek Scare Impacting Data Center Demand?

AREP’s previous funds, the company said, focused on a value-add/opportunistic strategy and became the basis for AREP’s long-term data center strategy.

AREP did not reply to Commercial Property Executive’s request for additional information.

Tough growth for data centers

Nationally, the data center sector is marked by the confluence of rising demand for capacity, driven by digital services, cloud computing, AI and 5G, and a record level of construction activity, according to a recent outlook from CBRE.

Despite the pace of construction, CBRE forecasts, the data center market will face challenges in keeping up with demand, driving higher utilization of existing facilities and reducing vacancy rates. In 2024, the average vacancy rate for primary markets fell to a record-low 2.8 percent and the average preleasing rate of new construction hit a record high, according to the report.

Based on that, CBRE expects average preleasing to hit 90 percent or more this year, alongside “rental rates rivaling the record highs of 2011-2012.”

CBRE’s outlook singles out five markets—Northern Virginia, Silicon Valley, Dallas–Ft. Worth, Atlanta and Chicago—as regions with greater competition for land and power.

The post AREP Closes Oversubscribed Fund at $309M appeared first on Commercial Property Executive.

In late January, a bolt from the blue struck the tech world—and, indirectly, commercial real estate. Chinese startup DeepSeek claimed its AI model not only outperformed OpenAI’s data-intensive model, but also that training took a tiny fraction of the resources, including computing power.

If these assertions hold at least some water, one conclusion can be that data center demand might take a big hit, rather than the expansive increase foreseen by virtually everyone just one month prior. That would, in theory, negatively impact development, which has lately been in overdrive.

… Or would it?

Data center experts are skeptical that DeepSeek’s announcement will make much of a dent in the development boom. For one thing, the company’s vaunted efficiency might be over-hyped. More fundamentally, even if DeepSeek’s claims are true, and other AI developers start employing similar data-saving methods, the pace of AI growth is still too relentless to slow down appetite.

In fact, more efficient AI might even add to data center demand, industry veterans said.

READ ALSO: Are Data Centers Immune to CRE Market Forces?

“This is going to make things easier, faster and cheaper—a classic Jevons Paradox in action,” Howard Berry, principal, national data center solutions at Avison Young, told Commercial Property Executive. He’s referring here to an economic theory saying that increasing efficiency associated with a particular resource can counterintuitively lead to increased consumption of that resource, as lower costs lure more buyers into the market.

“We anticipate an overall increase in technology usage and investment, since more affordable and open-source AI technology will attract more participants to the AI market, which will boost data center demand even more than the unprecedented demand we’re currently witnessing,” Kristen Vosmaer, managing director with JLL Data Center Work Dynamics, said.

In speaking with customers and tracking activity following the news, the consensus is that, while models such as DeepSeek may optimize resources at a facility level, there’s still a global, long-term data center capacity shortage, Vosmaer added.

“If the technology delivers as promised, we should fully expect U.S.-based companies to develop similar models, especially with open-source access,” Berry said. “The bottom line is that demand for data center space isn’t going anywhere—if anything, this kind of advancement will drive even more need for high-performance infrastructure.”

There’s more to data centers than AI

DeepSeek’s innovations might shake things up, but AI is only one part of data center demand. Still a very significant driver, indeed, but even optimistic scenarios say that AI will represent less than 50 percent of data center demand by 2030, JLL reported. Lower-intensity workloads such as data storage and cloud-based applications are bound to drive most of total demand.

“All industries are susceptible to innovation-driven disruption, as we’ve seen that play out time and again,” John McWilliams, head of data center insights at Cushman & Wakefield, pointed out. “It’s reasonable to conclude that AI is susceptible to optimization and efficiency gains, and we should probably expect it.”

That said, McWilliams noted that it’s still too early to tell if claims of a vastly cheaper way to produce LLMs will fully shake out. Also, pre-AI demand drivers are still around, and they would have gained steam either way.

“AI catalyzed the need for more cloud infrastructure and network expansion, but it isn’t fundamental to demand for hyperscale and colocation space,” McWilliams said. “Instead, it represents additional demand that runs on top of all that.”

READ ALSO: The Stargate Project Promises a Data Center Boom. Can It Deliver?

The U.S. data center market is tight right now, with vacancy at 4.2 percent. AI efficiency gains could merely increase power availability for other data center needs if existing LLMs were just maintained and not improved, McWilliams also pointed out.

“More likely than not, though, AI firms will continue to improve the quality of their existing LLMs and produce more powerful AI. While each query may require less energy, overall power requirements will likely not see a reduction as demand for AI continues to grow.”

Data center innovation still needed

It’s still time to invest in data center innovation, regardless of DeepSeek or similar models, said Jennifer DiMambro, Arup’s Americas and Global science, industry and technology leader. Rather than slowing down the industry, innovations will only accelerate its growth, Berry added.

More than $500 billion globally has been invested in data centers over the last three years, Vosmaer noted, and these multi-year construction projects are powering through. There will be ongoing refinement in size and power, as is normal in a growing industry, but the underlying premise of growth in AI, cloud and IoT will continue to spur innovation in real estate development and operations.

READ ALSO: Why Big Data Centers Are Going Nuclear

“The most common way companies overpay for data centers is through purchasing too much power,” Jeff Howell, chief growth officer with ENCOR Advisors, told CPE. “Everyone is anxious about not purchasing enough power capacity for their regular applications, and now layering intelligence on top of that takes it to a whole new level.”

Given the power constraints globally stemming from AI, the industry needs breakthroughs in computing efficiency because relying on carbon-free technologies such as wind, solar and nuclear are too slow and won’t meet demand over the next decade, Howell said.

“In Canada, for example, we have world-class nearly carbon-free electricity, but need to dip into oil and natural gas to keep up with data center demand in what was previously a flat electricity market,” Howell added.

“This progress can’t be slowed,” DiMambro told CPE. “These centers are the beating heart of AI, housing the high-performance servers and hardware that make it all possible. As many have already pointed out, increasing efficiency in technology often simply results in increased demand, and the need for smarter, greener data centers will be even more important.”

The post Is the DeepSeek Scare Impacting Data Center Demand? appeared first on Commercial Property Executive.

In preparing the report, the law firm analyzed more than 950 purchase and sale agreements and over 500 property management agreements—data from the volume of transactions that DLA Piper handles in major U.S. markets. Overall, the company noted, deal volume in acquisitions and dispositions, including joint ventures, was robust in 2024, despite the still-elevated cost of capital.

Investors were particularly interested in downtown and metro areas in major markets such as Washington, D.C., New York City and Chicago. Among the states, there was “significant transaction volume” in urban and suburban areas across California and Texas, DLA Piper found.

Among non-residential property types, industrial still represented the highest percentage of 2024 investment deals in the data set analyzed in the report, but just barely at 12 percent, down sharply from 21 percent in 2023 and 20 percent in 2022. Office investment ticked up from 8 percent in 2023 to 11 percent in 2024, showing that the sector isn’t completely kaput.

Investment in retail assets was stable at 9 percent of the total in 2024, the same as the year before, and hotels dropped from 4 percent to 1 percent over the same period, the report found.

The steepest year-over-year rise in investment, however, was in data centers. As recently as 2020 and ’21, none of DLA Piper clients were acquiring data centers, and only 1 percent were in 2022. By 2023, 4 percent of the deals involved data centers, and by 2024 the volume had swelled to 9 percent.

READ ALSO: CBRE Survey Indicates Optimism by Investors

Despite these movements in investor interest, the fact of the matter is that residential properties totaled the most: 40 percent of all the 2024 transactions studied by the report, a figure that hasn’t changed much since the pandemic (though only 15 percent of investors acquired multifamily in 2019).

Financial contingencies up slightly

The report also covered financial contingencies among the universe of transactions handled by the company, finding a slight increase in the total percentage of transactions in which financing contingencies were present, up from 10.71 percent in 2023 to 11.11 percent in 2024.

“We saw a more noticeable shift between contingencies for loan assumptions versus contingencies for new loans,” the report explained.

Of the 11.11 percent of transactions where a financing contingency was part of the deal, the percentage of loan assumption contingencies rose from 7.14 to 8.64 percent between 2023 and ’24, while the percentage of new financing contingencies dropped from 3.57 percent to 2.47 percent over the same period.

The report chalked up those movements to the fact that, while interest rates dropped somewhat in 2024, in many cases a buyer can still obtain a better rate by assuming existing financing, which tends to date from the period before the anti-inflation hike in rates.

The report also found that the most common survival period for representations and warranties continued to be 270 days, a period common to 46 percent of the transactions DLA Piper handled in 2024. The number-two most popular survival period was 180 days, which had a 28 percent frequency.

Penalties for breach of representations and warranties didn’t change much between 2023 and ’24, the report noted, especially those deals with purchase prices below $125 million. Larger deals saw more movement to increase average liability caps, especially those of more than $300 million.

Property management trends

Property management fees continued to be toward the middle of the range, the DLA Piper report found, with most coming in between 2 percent and 5 percent of rent, with an increase in fixed fee arrangements.

The clustering of property management fees in the middle range was especially noticeable in the residential sector, where (for example) about two-thirds of fees for apartments came in between 3 percent and 4 percent, with a similar range for student housing and manufactured housing. Senior housing fees were higher, however, three-quarters of which were above 5 percent.

Among non-residential property types, fees were more widely spread. For industrial, 35.9 percent of managers charged 5 percent or more, while the rest charged anything from less than 1 percent to as much as 5 percent. Office and data centers likewise were scattered across the range of fees.

Construction management fees across property types didn’t change much in 2024, the report noted. Most residential management fees are higher than 5 percent, with senior housing an exception at between 2 percent and 3 percent. For industrial, 41.8 percent of construction fees totaled 5 percent or more, but nearly a third of such fees came in between 2 percent and 3 percent.

The post Which Asset Classes Stole the Spotlight in 2024? appeared first on Commercial Property Executive.

Harrison Street has raised roughly $600 million across its HS Digital Fund and associated vehicles. This marks the company’s first dedicated pool of capital for data center investment.

The firm expanded its digital assets platform due to the surging data consumption, according to prepared remarks by Michael Hochanadel, managing director at Harrison Street.

Over the past seven years, the firm has committed more than $5.6 billion to powered shells, carrier hotels and colocation sites, as well as dark fiber assets. Harrison Street invested in more than 24 digital assets encompassing about 6.5 million square feet of data centers and north of 2.1 gigawatts of capacity.

Last May, the company acquired a 50-acre site in Irving, Texas, in partnership with PowerHouse. Plans call for the construction of a roughly 1 million-square-foot data center campus with a capacity of 200 megawatts at full build-out.

Five months earlier, the same joint venture closed on another site for a data center campus, this time in Reno, Nev. The stated goal was to construct a 900,000-square-foot facility estimated at $400 million.

Data center development grows despite energy shortage

The U.S. data center capacity is set to grow from 22 gigawatts in 2024 to 26 gigawatts in 2025, according to JLL’s Global Data Center Outlook. This year, the company forecasts 4.4 gigawatts of new construction to break ground across the nation.  

The strained power grid remains among the largest roadblocks for new data center developments. In Virginia alone, data centers represent more than 25 percent of the energy demand. A solution that gained traction is the implementation of nuclear energy for data centers.

The Stargate Project, which aims to invest $500 billion over the next four years to build new OpenAI infrastructure across the U.S., could also use nuclear energy, according to Bloomberg. Of the investment pool, $100 billion is slated for immediate deployment.

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The AI-spurring Stargate Project was front and center at the White House the day after the inauguration of President Donald Trump, but its real estate footprint remains undetermined beyond a group of data centers under construction in Abilene, Texas, about 150 miles west of Fort Worth.

Such a large expansion would face the same challenges as the industry as whole already does, including constraints on energy, construction resources and good sites for data centers, experts tell Commercial Property Executive.

$100 billion flood of investment

“We have a significant power issue that has to be solved before we need to consider construction resources,” Pat Lynch, CBRE’s global head of data center solutions, told CPE, referring to the industry’s ever-growing need for power. “It’s also challenging to know if there will be enough construction resources, because the timeline for allocating the capital to the project is still unknown.”

“Before considering construction resource availability to fulfill the announced $100B investment by the Stargate joint venture, we need to consider what power availability looks like,” agreed John McWilliams, a research manager at Cushman & Wakefield and the firm’s head of data center insights,.

“This is the first thing that developers are going to look at when evaluating a new project,” McWilliams said. “Can the grid support an x-megawatt project? This is also going to show significant variance from market to market.”

The announcement promised that Stargate would deploy $100 billion “immediately” as the beginning of an investment of $500 billion over the next four years “building new AI infrastructure for OpenAI in the U.S.,” which presumably means a large expansion in data centers, though no specifics were given. It is possible that some large percentage of the total would go toward developing power infrastructure for the new data centers, which is acknowledged to be a critical need to make Stargate work.

READ ALSO: Why Big Data Centers Are Going Nuclear

Nor is it clear whether the announced total funding includes previous funding for data centers announced by the lead companies, or whether they have that kind of capital to begin with. Tech mogul Elon Musk publicly asserted that they did not, which was in turn denied by SoftBank, which, together with OpenAI, Oracle and MGX, collectively formed Stargate. The partners made the project announcement on the first full day of the second Trump administration, with the president asserting his support through unspecified emergency declarations.

Assuming the capital can be deployed, and even if only a large percentage of that $100 billion goes into developing data centers per se, that could potentially represent an enormous bump for a sector that is already booming, and exacerbate the industry’s growth woes.

Through the first six months of 2024, a total of 78 data center projects began construction nationwide, according to Dodge Construction Network data, totaling more than $9 billion in investment. This is the largest value and number of projects that data centers have ever seen in a first half going back to 2008.

Data center growth capacity strained

“The Stargate initiative is a game-changer for data center development, but it’s going to test the industry’s capacity to deliver,” said Howard Berry, Avison Young principal of national data center solutions.

“We’re already seeing pressure on supply chains for critical materials like semiconductors and electrical components, and addressing those bottlenecks will require close coordination with suppliers and a proactive approach to securing resources,” he noted.

According to JLL’s 2025 global data center outlook, an estimated 9.8 GW is projected to break ground globally in 2025 across hyperscale and colocation segments, with 4.4 GW of that new construction in North America. Separately, 3.3 GW is likely to reach completion in North America this year.

“Most of that space is already pre-leased and won’t be enough to satisfy current demand,” Kristen Vosmaer, Managing Director, JLL Data Center Work Dynamics, told CPE. 

Thus there are enormous market incentives in play to spur growth among data centers, but Vosmaer said the challenges of growth can be met.

“While the supply chain and labor market remain somewhat constrained in some markets, these challenges are overcome by proper planning and collaboration,” Vosmaer noted.

Labor remains another big piece of the equation, Berry added. The shortage of skilled workers such as electricians, HVAC technicians and IT professionals means prioritizing training programs and actively bringing new talent into the field.

Cost is also a factor. Data center building costs have increased by more than 35 percent since the beginning of 2019, McWilliams told CPE, citing Cushman & Wakefield Research data.

There are also currently significant lead times required for data center components, some as high as 30 to 38 weeks to order generators and nearly 12 months for switchgear, McWilliams said. Labor availability and costs, show significant variance across markets with labor availability higher in larger markets.

“We are hearing about extended lead times for electrical equipment – switchgear, transformers, and so on, for development that is a challenge delaying construction timelines,” agrees Gordon Dolven, director of Americas data center research at CBRE.

“On the labor front, construction workers, mechanics, electricians, and plumbing experts are all required for a modern facility,” Dolven said. “Site selection factors into proximity to major airports for this specific reason.”

Tricky site selection challenges ahead

The data centers under construction in Abilene, now under the Stargate Project aegis, include 10 buildings totaling 5 million square feet, with a planned expansion of another 10 buildings of similar size, Oracle Chief Technology Officer Larry Ellison said at the announcement.

Stargate also said that talks are ongoing with local officials around the country to find sites for more data centers, but didn’t identify any particular locations. Virginia, Ohio and Texas are the top states for data center construction, with the accessibility of power infrastructure, a lower cost or wider availability of land, and the competitive tax incentives offered by the states figuring into their popularity, Dodge explains.

Adding further data centers to the largest markets, or even in other parts of the country, stands to be sometimes problematic, as the race will be on the sites necessary for expansion and competition for those sites will be fierce. Localities in various parts of the country are also pushing back on data center development as it stresses electric grids.

For example, a number of legislators from both parties in the Virginia General Assembly—whose state is home to more data centers than any other—are working on measures to tighten state oversight of data centers, perhaps even pause development, though for now no proposal is likely to pass.

To deal with site selection issues, one strategy that the data center industry is going to pursue is turning to emerging markets with ample power capacity, potentially opening new sources of labor as well, Vosmaer said.

Nevertheless, site selection will be increasingly tough, perhaps even more so as a flood of Stargate properties comes to market to compete for sites as well.

“Finding and preparing development-ready sites is an equally pressing challenge,” Berry noted. “Even if you locate a site with potential for power, you’re looking at a three- to four-year wait just to secure a breaker or transformer to turn that power on. That’s a serious bottleneck.”

Part of the solution is partnering with groups that already have a head start in addressing these issues, but the industry also needs to rethink its reliance on the traditional power grid.

“The future of data centers lies in self-generating power through technologies like SMRs (small modular reactors) or gas turbines,” Berry said. “Not only does this provide reliability, but it also creates the opportunity for data centers to feed power back to the grid using low-emission resources, making them a net positive for the broader energy ecosystem.”

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The joint venture of Blue Owl Capital, Crusoe Energy Systems and Primary Digital Infrastructure has obtained a $2.3 billion loan to capitalize a 206 megawatt build-to-suit data center development in Abilene, Texas. J.P. Morgan provided the note in a Newmark-brokered deal.

The three companies formed the $3.4 billion joint venture in October. Funds managed by Blue Owl’s Real Estate division and Primary Digital Infrastructure will jointly finance the 998,000-square-foot, two-building data center, which is being designed, developed and operated by Crusoe.

Oracle has already committed to the entire complex under a long-term lease, according to Data Center Dynamics. Occupancy is scheduled to commence in the second half of this year.

READ ALSO: Are Data Centers Immune to CRE Market Forces?

The project is part of Lancium Clean Campus, an 1,100-acre development that broke ground in late 2022 and was initially set to be a bitcoin farm. It currently has 200 megawatts of data center power capacity, with a total of 1,000 megawatts to be energized by the end of the year and an additional 1,000 megawatts in process.

Crusoe broke ground on the Abilene campus last year and is expected to deliver initial capacity in the following months. The site will also boast 300 megawatts of on-site self-generation. Once complete, the facility will be capable of running up to 100,000 GPUs on a single network.

The purpose-built data center is also set to include high-density data halls specially designed for AI workloads and use renewable energy sources, including nearby wind power. The design will support both direct-to-chip liquid cooling and air cooling.

Newmark Co-President Jordan Roeschlaub, Vice Chairman Clint Frease and Managing Director Ben Kroll, along with Head of Data Center Capital Markets Brent Mayo, secured the loan.

Data centers on the rise

Despite power constraints, the data center market is expected to continue to thrive, the expansion of AI applications being a major driver behind the growth. Global data center energy demand is set to double in the next five years to 100 gigawatts, according to a JLL report.

Texas had almost 440 completed data centers including colocation, hyperscale, cloud and enterprise data centers as of the third quarter of 2024, according to a LandGate Corp. report. That number is poised to grow, with two developments in the state already announced since the beginning of the year.

Earlier this month, Lincoln Property Co., Gigabit Fiber and Tradition Holdings formed a partnership to develop a data center campus in South Dallas. Dubbed GigaPop, the project will comprise more than 800,000 square feet across four buildings and will boast up to 540 megawatts.

Also in the Metroplex, Provident Data Centers formed a joint venture with PowerHouse Data Centers for the construction of a hyperscale campus in Grand Prairie, Texas, which is set to be one of the largest in the U.S. The first phase of the 768-acre project is expected to generate about 500 megawatts, while the entire campus will have 1.8 gigawatts of capacity at full build-out.

The post Blue Owl JV Obtains $2.3B for Data Center Project appeared first on Commercial Property Executive.

To facilitate the development, PowerHouse and Poe have secured access to an initial power capacity of 335 megawatts for the campus, which will be expandable to 402 megawatts. A new switch station will be built by regional utility LG&E, which is slated to be completed by September 2026, along with a dedicated on-site substation. 

Water is equally important for the development. The campus will benefit from Louisville Water Co.’s excess capacity within its water treatment system, as well as the nearby Ohio River, with an average of 75 billion gallons flowing by Louisville daily.

READ ALSO: Data Center Demand Keeps Surging, Despite Challenges

In the data center industry, Kentucky and southern Indiana have been relatively minor players, but there are indications that that is beginning to change. In 2024, Facebook parent Meta unveiled plans for a $800 million data center project in Jeffersonville, Ind., which is in metro Louisville.

Also last year, the Kentucky legislature enacted a 50-year tax-exempt program for a wide range of activities involving data centers: the sale, purchase, use, storage, consumption, installation, repair and replacement of data center equipment in large population centers in the Commonwealth, effectively Jefferson County. The Poe-PowerHouse project is taking advantage of the new tax exemption.

PowerHouse has 87 data centers underway or completed, representing more than 5.9 gigawatts of power, in six U.S. markets. Recent deals include receiving a $600 million loan for a 50 megawatt build-to-suit data center development in Northern Virginia along with partners Blue Owl Real Estate and Chirisa, and the purchase of 122 acres in Charlotte, N.C., to build a 300 megawatt data center campus in partnership with real estate investment management firm Town Lane.

Louisville-based Poe Cos. specializes in multifamily, industrial and hospitality development. The company’s partnership with PowerHouse represents its first foray into data centers.

Data center boom unrelenting and power hungry

Power is now key to the growth of the industry. Data centers use between 100 to 200 kWh per hour, or 72,000 to 144,000 kWh per month, according to IT infrastructure specialist PivIT. By contrast, the average American home consumes 10,500 kWh per year.

The U.S. has the most hyperscale data centers—north of 5,300 such facilities, PivIT notes. In 2019, the nation’s data center load was 19 gigawatts, a total that could reach 35 gigawatts by the end of the decade. 

Data centers also contribute to climate change through their energy consumption, though they don’t do so directly by producing carbon dioxide; the electricity they consume does, PivIT explains. Data centers are responsible for about 1 percent of global energy-related emissions.

The post PowerHouse JV Eyes Kentucky’s 1st Hyperscale Data Center appeared first on Commercial Property Executive.

The company brought in more than $5 billion of primary equity and over $7 billion of debt commitments to fund its accelerated platform expansion and ongoing innovation, such as 5+GW of planned future capacity to be installed across the Americas.

Macquarie Asset Management manages the fund alongside multiple large global investors with significant experience in digital infrastructure.

Macquarie also pledged $5 billion to Applied Digital’s high-performance computing data centers, with an initial $900 million allocated to its Ellendale facility in North Dakota.

Similarly, DigitalBridge has expanded its global footprint by acquiring Yondr Group, a data center development company, to better serve hyperscale clients.

KKR and Energy Capital Partners have also announced a $50 billion investment in data center and power generation projects over the next four years, underscoring the sector’s critical role in supporting AI and advanced computing needs.

“These investments reflect strong confidence in the data center market, focusing on developing new facilities and acquiring existing infrastructure to meet the rapidly evolving demands of the digital economy,” Howard Berry, principal, national data center solutions, Avison Young, told Commercial Property Executive.

Surge coming in 2025

Moody’s Ratings forecasted global data center capacity to surge again in 2025.

Most of the new capacity coming online is preleased to Microsoft, Google, AWS, Meta and Oracle, which will limit the risk of introducing a significant surplus of unoccupied capacity into the market.

READ ALSO: Are Data Centers Immune to CRE Market Forces?

Additionally, new colocation data center capacity is being developed for small to medium-sized tenants who pay higher lease rates on a per kilowatt per month basis. Vacancy rates may briefly uptick in some markets until this newly available colocation capacity is fully leased. However, given supply constraints in most markets, they will remain low.

Major private equity investors have eagerly snapped up medium-size and large data center REITs and developers, according to Moody’s. Even larger mega partnerships have formed in recent months, such as the $100 billion Global AI Infrastructure Investment Partnership involving Blackrock Inc. (Aa3 negative), Microsoft and MGX, as well as KKR and Energy Capital Partners’ $50 billion partnership to invest in data centers and power generation for the foreseeable future.

JLL, too, reports a surge in data center activity.

Chris Downie, CEO of Flexential, told CPE that the data center industry continues to attract significant investment as businesses grapple with the challenges of scaling digital infrastructure to meet unprecedented demand.

Flexential has a partnership with Morgan Stanley Infrastructure Partners and GI Partners to accelerate its growth.

“This influx of capital reflects not just confidence in the sector, but it also recognizes the critical role that data centers play in powering AI, cloud adoption and enterprise digital transformation,” Downie said. “Investors are increasingly focused on funding projects emphasizing scale and sustainability.”

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The company, a global data center operator with more than 30 sites worldwide, announced the acquisition of the property in Upper Burrell, Pa., for its latest project, TECfusions Keystone Connect. The price TECfusions paid Arconic Corp., a metal manufacturer that was spun out of Alcoa Corp. in 2016, for the 1,395 acres, was not disclosed.

TribLive.com reported TECfusions has already spent more than $150 million to prep Building J on the site and repurpose Buildings C and D. Arconic had announced plans to sell four of seven buildings on the site in 2022, according to the Western Pennsylvania news website. Alcoa still has a presence on the site as well.

READ ALSO: Data Center Demand Keeps Surging, Despite Challenges

By using an adaptive reuse strategy, TECfusions will be able to rapidly deliver infrastructure to meet the growing demand for artificial intelligence and high-performance computing. The company said the campus has 12 MW of immediate capacity. A brochure for the site, located within New Kensington in Upper Burrell Township, notes 1 GW has already been leased. Among the site advantages listed in the brochure are contract to deployment in less than six months and the availability of tax abatements and incentives.

The project has received a $2 million grant from Pennsylvania’s Redevelopment Assistance Capital Program, a program to incentivize design, acquisition and construction of improvement projects. Information released about the funding noted three buildings will be reserve powered by a dual fuel energy-efficient, low-emission on-site microgrid. The number of microgrids is growing throughout the U.S., particularly  for use at energy-intensive properties like data centers, industrial, advanced manufacturing, health-care, retail and critical infrastructure developments.

TECfusions states the facility will feature on-site power generation using natural gas, enabling dual utility and microgrid capabilities that will ensure reliability, efficiency and reduced dependency on increasingly costly utility power. The firm may also export excess power to support the local electrical grid.

The first phase of TECfusions Keystone Connect will include equipment, emergency generation, UPS systems, electric switchgear, transformers, breakers, cabling and building materials, according to the RACP. To be eligible for RACP funding, projects must have a regional or multi-jurisdictional impact and generate substantial increases or maintain current levels of employment, tax revenues, or other measures of economic activity.

Expanding in Virginia

The news about TECfusions’ plans for the Western Pennsylvania data center campus comes just two months after the firm obtained a 15-year loan of approximately $300 million to fund the development and expansion of its Clarksville, Va., data center property. The loan will fund the Phase 1 buildout and other company key initiatives including providing AI-ready infrastructure and sustainable power generation solutions.

The Clarksville site will have four data halls with a combined capacity of 37.5 MW. C-Hall already came online in September and construction of D-Hall is expected to be completed next month.

The expansion was needed to serve the needs of one of its key tenants—TensorWave—which leased 1 GW of AI infrastructure capacity at the facility, marking one of the largest commitments in the sector.

TECfusions acquired the original 22.5-acre site and 196,000-square-foot facility with 500 kilowatts already live and immediately began upgrading it. The company recently acquired 66 acres for a planned expansion.

The post TECfusions Unveils Massive Data Center Campus Near Pittsburgh appeared first on Commercial Property Executive.

Globally, the data center capacity is likely to expand 15 percent per year through 2027, perhaps more, with capacity in the Americas (led by the U.S.) expanding to roughly 30 gigawatts.

One of the prime spurs of data center growth will be the parallel growth of AI applications, which are expanding rapidly across nearly all U.S. and global industries. Capital expenditures on the technology have risen sharply during this decade, including that by Alphabet, Amazon, Meta and Microsoft, with preliminary estimates putting the total at more than $200 billion in 2025, or more than twice as much as in 2020.

AI demand will mean more than just accelerated power demand, but also a push for further miniaturization in data center design. JLL anticipates that advances in chips will eventually reach 250 kW per rack, an amount the report calls “astounding.”

“The ability to train, iterate and improve AI models at much faster speeds is making the entire AI ecosystem more valuable,” the report noted. “The pace of AI innovation will continue to accelerate with each new generation of GPUs.”

READ ALSO: Are Data Centers Immune to CRE Market Forces?

Though AI will continue to grow, for the data center industry, data storage and cloud-based applications still make up the majority of demand. Optimistic adoption scenarios suggest that AI workloads will still represent less than 50 percent of data center capacity in 2030.

Energy demand

Data centers use a considerable amount of energy, but they will actually represent a relatively small portion of the near-future increase in demand for energy, despite media attention on the subject. Currently, only about 2 percent of electricity worldwide goes toward powering data centers. The increase in electricity demand by data centers through 2030 is projected to be less than a third of that needed for both EVs and air conditioning.

Even so, the fact that data centers tend to cluster in certain places, such as Northern Virginia, tends to put pressure on power grids in those places. In Virginia, data centers represent more than a quarter of power demand. Such concentrations will pose challenges in the further development of data centers, with much of the delay associated with securing easements and regulatory approvals.

Nuclear power is emerging as a solution to meet the demands of data centers, according to JLL. Some of that demand will be met by conventional reactors, but much might eventually be met by small modular reactors, which can provide a scalable range of power, from 1.5 MW to 300 MW. SMR technology is still being developed, however, and may not make an impact on the data center power industry until the 2030s.

Data center efficiency

Power isn’t the only challenge faced by the data center industry, according to the JLL report. As AI expands, cooling increasingly dense and power-hungry data centers will be increasingly urgent. The development of more energy-efficient chip architectures and advanced liquid cooling systems will be part of the industry’s response.

The need for more immersion cooling will change the design of data centers, the report explains, with liquid cooling more important than ever for high-density racks.

“Immersion cooling introduces new challenges in structural design due to weight consideration,” the report says. “The weight of the largest cooling baths can reach up to four metric tons when filled with equipment and cooling fluid, which requires significantly reinforced flooring.”

Despite the challenges facing data centers, investors will remain interested in the sector, JLL predicted. Different classes of investors generally have different goals in data centers: Institutional investors have been acquiring global operators, while private equity focuses on funding development. Alternative investors buy individual assets when they can.

This year promises to be another record year for data center development, with an estimated 10 GW projected to break ground globally in 2025. On the other hand, a relatively small number of data centers trade each year because they simply don’t come on the market that often. 

Global data center investment sales have averaged just $7 billion annually since 2020, JLL reported. That compares to an annual average of $241 billion for office assets over the same period.  

The post Data Center Demand Keeps Surging Despite Challenges appeared first on Commercial Property Executive.

Lincoln Property Co., Gigabit Fiber and Tradition Holdings have formed a partnership for the development of a data center campus in South Dallas. When complete, the facility dubbed GigaPop will include more than 800,000 square feet of data center and tech space across four buildings and boast up to 540 megawatts of power. Construction is scheduled to commence this quarter.

Designed for cloud computing and artificial intelligence users, with high-capacity and low-latency optical networks, the $1 billion project will rise on a 131-acre lot of entitled land. The site is at 1745 Stainback Road in Red Oak, Texas.

READ ALSO: More Data Centers, Please!

The campus will provide edge colocation, dark fiber and carrier-class IP transport services that will benefit the other 15 sites underway in the area, Gigabit Fiber CEO Tom Spackman said in prepared remarks. Its first component will be a 2 megawatt facility totaling 7,500 square feet.

The site is in the center of South Dallas’ data center hub, 4 miles east of Interstate 35 and 4 miles west of Interstate 45, along the recently opened Loop 9 Highway.

The location is also 24 miles from another Dallas-Fort Worth development, PowerCampus Dallas. The 115-acre data center project in Lancaster, Texas, is developed by SkyBox Datacenter in partnership with Bandera Ventures and Principal Asset Management.

Multiple data center projects underway in DFW

The South Dallas submarket currently has multiple projects underway that will deliver more than 1.5 gigawatts of capacity, according to Lincoln Executive Vice President Ryan Sullivan. Some 678 megawatts are already under construction and expected to reach completion this year and in 2026.

The metro’s largest project is a hyperscale campus in Grand Prairie, Texas, that will become one of the largest data center complexes in the country. To be developed by Provident Data Centers and PowerHouse Data Centers, the facility is expected to generate 1.8 gigawatts at full build-out.

In September, DataBank started construction on a 480 megawatts project also in Red Oak. The campus will include eight data centers.

The post Lincoln Property JV Eyes $1B Data Center Campus appeared first on Commercial Property Executive.

Provident Data Centers has entered into a joint venture with PowerHouse Data Centers for the development of a hyperscale campus in Grand Prairie, Texas. When complete, it will be one of the largest data center campuses in Texas and the U.S.

The multi-phase development will be designed as a shell campus with ample power sourcing that will meet the growing demand for data centers from industry operators in the Metroplex.

The partners intend to break ground on the 768-acre project in the second quarter of this year, according to the Dallas Business Journal. Phase One is set to generate some 500 megawatts of power, while the entire campus is expected to generate 1.8 gigawatts at full build-out.

READ ALSO: Are Data Centers Immune to CRE Market Forces?

This will be the second Metroplex data center development for PowerHouse. The company entered the market in May with a project developed in partnership with Harrison Street. The upcoming data center in Irving, Texas, will total approximately 1 million square feet and generate 200 megawatts.

Owned and operated by American Real Estate Partners, PowerHouse has 25.5 million square feet of data center space in various stages of development across six key markets. The portfolio totals more than 5.9 gigawatts.

Dallas-based Provident Data Centers has developed north of 50 projects in six states since its inception. Their campuses generate more than 3.8 gigawatts of power.

A hotspot for data centers

In the first half of 2024, the Metroplex had 637.5 megawatts in underway projects and 848 megawatts in operation, according to a Cushman & Wakefield data center report. The metro is one of the top five data center markets in the country, but more affordable than Northern Virginia or Silicon Valley.

One of the current developments is DataBank’s project in Red Oak, Texas. Coming online on 292 acres, the data center campus will total 480 megawatts across eight buildings at full build-out.

The post PowerHouse, Provident Team Up for DFW Project appeared first on Commercial Property Executive.

In 2023, data centers across the globe consumed 7.4 gigawatts of power, a 55 percent increase over 2022 usage, reported Cushman & Wakefield. And by 2026, AI electricity consumption could be 10 times higher, exceeding 1,000 terawatts globally—equivalent to Japan, predicted the International Energy Agency.

This level of growth is causing alarm among power companies and grid operators, as data centers already put a tremendous strain on existing electrical grid infrastructure, potentially leading to localized power shortages, high costs to upgrade the grid and challenges in managing peak demand fluctuations, particularly if concentrated in specific regions, noted a report from global law firm White & Case. One solution gaining ground with utilities and large-scale data center operators is nuclear energy both for its high capacity and its energy efficiency.

READ ALSO: Interest Rates Are Still High. So Now What?

“It is the only green, at-scale solution for gigawatt-scale power,” said Todd Smith, co-leader of Transwestern’s Technology Properties Group. “AI is driving trillions of capital deployment and forcing a grid that has had low growth for 20 years to suddenly expand. This will drive atomic investment.” 

Nuclear in action

Nuclear power is already playing a major role in powering data centers. Various utilities serving major data center markets receive 20 percent to 35 percent of power from nuclear generation, noted Pat Lynch, executive managing director of CBRE Data Center Solutions. For example, nuclear makes up nearly 34 percent of Dominion Power’s fuel mix in Northern Virginia, the biggest data center hub in the nation.

“Nuclear provides great baseload generation power, which differentiates itself from variable generation power,” Lynch said, explaining that baseload power is important for data centers because of the uptime-reliability requirement of 99.9999 percent. Nuclear can provide a sustainable alternative to fossil-fuel energy generation, replacing coal, natural gas and oil-fired plants, he added.

Data center operators are also continuing to ramp up nuclear energy capacity. Microsoft, for instance, recently signed a 20-year power purchase agreement with Constellation Energy to provide electricity to Microsoft data centers in the mid-Atlantic region from the Unit 1 reactor at the Three Mile Island nuclear power plant in Pennsylvania, which was unaffected by the 1979 partial meltdown of the Unit 2 reactor.

“For data centers, nuclear is better all-around than renewable energy,” commented Sean Farney vice president of America Data Center Strategy at JLL, noting that it’s not only more reliable than renewable energy resources but cleaner, because renewable energy sources require a carbon-powered grid to work. Nuclear energy also provides predictable kilowatt rates, and reactors have a life cycle of 40 years or more.

“Every data center operator out there wants nuclear because it answers ESG goals better than any other form of energy out there,” Farney remarked. “And the Magnificent Seven or hyperscale companies—the Microsoft, Googles, Metas and Amazons—have very strict goals and regulations internally around how sustainable they are.”

Efficient growth

A mid-year JLL data center report noted data center power loads are increasing, with new projects typically requiring 100 megawatts, and some new developments eclipsing one gigawatt. And the data center sector is not alone in its increasing power appetite. Manufacturing reshoring and electric vehicle adoption also challenge the grid. JLL mapped out general U.S. energy demand and supply projected over the next 10 years and found that supply can accommodate growth projected today. “The problem is,” said Farney, “data centers are growing much, much faster than everything else.”

Therefore, energy efficiency is critical. The White & Case report, which looked at innovative ways to make data centers more energy efficient and sustainable, noted that cooling data centers account for a vast portion of total energy consumption. It noted, for example, that some operators are employing natural resources for cooling: Japan is using snow, Finland is using seawater and geothermal techniques are being deployed in Iceland and Norway.

“The cost, source and availability of electricity are top priorities for data center operators,” said Lynch, noting many data center operators are employing tactics such as energy-saving software technologies and design features that maximize energy efficiency. They also are eliminating unnecessary equipment in server rooms and replacing old, inefficient equipment and cooling systems with more energy- and temperature-efficient technology.

But the bottom line for data centers is reliability, and currently available renewable energy sources cannot provide that consistency 24 hours a day. That presents a challenge both for growth and for sustainability, to which the tech industry is committed. That’s why low-carbon nuclear energy has risen to the top of the conversation.

“We have clients who are scouring the entire world for a lot of available power that’s reliable, and nuclear rises to the top of their list,” Farney said.

Barriers to entry

Nuclear power adjacent to the actual user can solve for grid constraints, but there are other challenges. “Time to deploy is a major obstacle that must be overcome with regulatory clarity,” Smith remarked. Therefore, data centers will require an interim solution before migrating to nuclear, most likely on-site generation with natural gas.

The primary investors in colocation energy facilities are legacy utilities and the infrastructure funds that back them, according to Smith. Hyperscalers, including Amazon, Oracle, Google and Meta, are all putting a toe in the water to help kickstart newer tech such as Molten Salt nuclear reactors, but it is not enough.

“There must be a concerted effort by Wall Street and the U.S. government to drive this innovation forward,” Smith stressed, noting that traditionally 80 percent of U.S. nuclear facilities have been funded by Department of Energy loans.

READ ALSO: Are Data Centers Immune to CRE Market Forces?

The NIMBYism around nuclear facilities is also an issue, since much of the U.S. population, especially people who remember the Three-Mile Island and Chernobyl reactor meltdowns, still feels negatively about nuclear energy. “If that industry were to talk about its safety, because of the extreme amount of regulations and safety operation protocols, I think the public-perception tide would turn,” Farney said.

There are plans to build energy grids dedicated to distributing power to data centers, but these are mostly in rural locations. “It is going to be hard to do it in cities due to emission concerns for natural gas turbines, and certainly NIMBYism for reactors in such locations,” Smith noted.

New technologies gain momentum

One of the most promising, innovative technologies soon to come online is small modular reactors, a small-scale nuclear technology embraced by big tech giants Oracle, Google and Amazon Web Services.

“They are all the talk,” Farney said. “Because of the scale, they can be done comparatively quickly compared to large nuclear plants.” Regulatory approvals and construction for a nuclear power plant, on the other hand, can take up to a decade.

While no SMRs are currently in operation today, the first SMR design, NuScale Power Corp.’s VOYGR has won Nuclear Regulatory Commission approval. NuScale, which is the technology provider, has partnered with ENTRA1 Energy, an independent global energy investment, development and production company, to finance and build its SMR facilities. ENTRA1 is underway on VOYGR factories worldwide.

The NuScale Power Module, which is designed based on proven pressurized water-cooled reactor technology, is 100 percent factory built, and two U.S. projects are already underway. The NuScale-ENTRA1 joint venture has partnered with Standard Power, a provider of infrastructure services to advanced data processing companies to develop and operate two VOYGR-powered facilities in Ohio and Pennsylvania.  Together, these facilities will produce nearly 2 gigawatts of clean, nuclear energy to support nearby data centers. The joint venture also is underway on VOYGR factories in Bulgaria, Romania, the Czech Republic, Poland and the Ukraine.

Tech giants Oracle, Google and Amazon Web Services all have data center-SMR colocation projects in the works. Google, for example, has partnered with SMR startup Kairos Power to build seven small nuclear reactors to power its AI drive. Under the agreement, Kairos Power will develop, construct and operate a series of advanced reactor plants, which will be co-located with Google data centers and provide a total of 500 megawatts of power by 2035.  The first SMR facility will come online in 2030.

Amazon, which has pledged to be carbon-neutral by 2040, has signed an agreement with Energy Northwest, a consortium of state public utilities that will enable the development of four advanced SMRs. The reactors, which will be constructed, owned and operated by Energy Northwest, are expected to generate roughly 320 megawatts of capacity for the first phase of the project, with the option to increase to 960 megawatts. These projects are scheduled to come online beginning in the early 2030s.

OKLO, another SMR startup, has signed agreements this year to provide up to 1,250 megawatts of power to three data center operators, including 500 megawatts to Equinix, one of the nation’s largest data center operators. The firm’s business plan differs from most other SMR developers in that OKLO does not sell its technology but rather acts as the energy plant developer and operator, selling electricity to its clients.

OKLO currently is working with Equinix to evaluate specific locations for SMR deployment, according to Brian Gitt, head of business development at OKLO. He noted that Equinix has publicly announced a $15 billion joint-venture fund with GIC and the Canada Pension Plan Investment Board to launch XScale, the firm’s hyperscale product, nationwide.

“They’re looking to build data center campuses of 100 megawatts or more, targeting 1.5 gigawatts total,” Gitt said, noting that the contract with OKLO will contribute to those projects. At full buildout, this new fund will nearly triple the investment capital in the Equinix XScale program.

Recycling nuclear waste

OKLO has developed an innovative, next-generation nuclear technology called “powerhouses,” which essentially recycle nuclear waste. The company’s Aurora powerhouse design is based on proven liquid-metal, cooled-sodium, fast-reactor, fission technology. The fast neutron reactor transports heat from the reactor core to a power conversion system that runs on material from spent nuclear fuel known as HALEU, or “high-assay, low-enriched uranium.” The company’s reactors are designed to scale to 15 megawatts and 50 megawatts. This provides the flexibility to expand a site’s power production by adding reactor units as data center capacity increases to meet growing demand, noted Gitt.

OKLO’s SMR technology is also mostly modular, which will reduce project regulatory complexity, costs and the construction timeline to about three years once the initial design is approved, which can take four to five years, according to Gitt. “There are significant differences from a technology perspective, and the impacts on cost and site and civil works are very substantial in that regard,” he noted. “But our approach is that we are building as much of the plant as possible in a high-quality, factory environment.”

The post Why Big Data Centers Are Going Nuclear appeared first on Commercial Property Executive.

Blue Owl Real Estate, Chirisa and PowerHouse Data Centers have received a $600 million loan for a 50 megawatt build-to-suit data center development in Northern Virginia. Newmark arranged the financing through a syndicate headed by Société Générale.

Located in the 300-plus-acre Chirisa Technology Park in Richmond, the project is preleased to hyperscale graphics processing unit provider CoreWeave. The development broke ground earlier this year and is scheduled to deliver its initial capacity in 2025.

Newmark’s Jordan Roeschlaub and Jonathan Firestone, along with Clint Frease, Nick Scribani, Ben Kroll and John Caraviello, in collaboration with Brent Mayo, secured the loan.

Newmark did not reply to Commercial Property Executive’s request seeking additional information about the property and the financing.

READ ALSO: Are Data Centers Immune to CRE Market Forces?

Blue Owl Real Estate is a leading real estate private equity platform with $27 billion in assets under management. Chirisa is a global investor active across digital infrastructure and real estate in the Americas and Europe. PowerHouse Data Centers is owned and operated by American Real Estate Partners and offers turnkey data center solutions, from site selection and acquisition through design, construction and operations.

Their $5 billion joint venture emerged just this past fall, focusing on developing large-scale AI/high-performance computing data centers on a build-to-rent basis. The Richmond development is the partnership’s first.

Tighter than tight

The data center market in Northern Virginia remains the nation’s largest, with an inventory of more than 2,600 megawatts and another 1,150 megawatts under construction in the first half of the year, according to a CBRE report. NoVa was also the second-tightest data center market in the U.S. after Hillsboro, Ore., the vacancy rate reaching 1.5 percent at the end of June.

In response to increasing concerns about power constraints, one proposed data center campus in Virginia will be sited near an existing nuclear power plant and will be accompanied by a hydrogen production facility and several small modular reactors. Green Energy Partners is developing the campus, the first of its kind in the U.S., on a 641-acre site in Surry and plans to invest $6.5 billion over the next 13 years.

The post Blue Owl, Chirisa, PowerHouse Get $600M for NoVa Data Center appeared first on Commercial Property Executive.

In partnership with Skybox Datacenters, Prologis is converting one of its warehouses into a high-capacity, turnkey data center with a marketed capacity of 32 MW.

The announcement did not include any further information on the transaction or the property, including its location. However, the Skybox website describes a similar project: Skybox Chicago I, a 10-acre, 190,000-square-foot, 30 MW in the northwestern Chicago suburb of Elk Grove Village, Ill.

Prologis stated that warehouse conversions are a key element of the company’s data center strategy, and that the warehouse in question is held in the U.S. Logistics Fund, a Prologis co-investment vehicle that’s focused on “premier logistics real estate, including higher and better use conversions.”

READ ALSO: Are Data Centers Immune to CRE Market Forces?

In a statement, Chris Curtis, global head of data centers, said that owning the world’s largest portfolio of warehouses gives Prologis the ability to identify higher-value conversion opportunities among the company’s approximately 5,600 buildings and 12,400 acres of land.

Prologis stated that over the next four years, it intends to develop about 20 data center projects, representing $7 billion to $8 billion in additional investment.

Sustained heat

The buyer has acquired the property under its DigiCo Infrastructure REIT, which reportedly intends to amass a AUD$4.3 billion ($2.76 billion) portfolio of data centers in Australia and the U.S.

In May, Commercial Property Executive took the temperature of the rapidly heating data center sector, in which Prologis and Blackstone are leaders among a sizable number of commercial real estate firms looking to take advantage of the AI-driven boom in data center development.

And earlier this month, we looked at the sector again, this time partly through the lens of the White House’s National Security Memorandum on AI.

The post Prologis, Skybox Sell Chicago-Area Data Center Project appeared first on Commercial Property Executive.

The Appomattox County Economic Development Authority and Virginia Gov. Glenn Youngkin were both on board, especially given that the campus will use substantial on-site green power.

AVAIO Digital has confirmed 300 MW of power from Central Virginia Electric Cooperative and Dominion and is cleared and ready for rapid construction.

The project is the latest addition to the company’s expanding portfolio of hyperscale facilities across the U.S. and Western Europe. AVAIO Digital has also recently launched plans to develop a 92 MW data center campus in the Bay Area. The $800 million Perseus Data Center marks the first phase of the developer’s 76-acre Pittsburg Technology Park in Pittsburg, Calif.

Hurdles ahead?

While some developers are getting deals done, others are facing pushback. This month, a proposal for a data center on Atlanta’s West Side was postponed by the Atlanta City Council after widespread pushback from the community, according to the Atlanta Journal-Constitution.

The Council recently passed a law banning data centers from being built near the Beltline and within a half mile of MARTA rail stations.

CIM Group, which in June closed on an initial $125 million loan commitment to fund the construction of Applied Digital Corp.’s high-performance computing campus in Ellendale, N.D., was able to gain permit approval permit for a fourth data center in Atlanta by submitting the project before the town council’s vote. The 10-story project will be adjacent to its existing 56 Marietta St. location. The proposed site at 10 Forsyth St. NW currently serves as a parking lot.

In South Florida, tenants have not embraced the data center development that has been delivered. Miami’s vacancy rate for instance is 16.4 percent, according to Data Center Hawk, as first reported by Bisnow. Nearly a fifth of the market’s data center space is unused, whereas in major markets like Northern Virginia, Dallas and Atlanta, vacancy is below 3 percent.

READ ALSO: Are Data Centers Immune to CRE Market Forces?

Miami lacks the key components to drive an efficient data center: a reliable, always-on power supply and controllable humidity and temperatures. Extreme weather events are another deterrent.

“Data center developers are encountering resistance from local governments and residents who view data center facilities as unsightly and power-hungry additions to their communities,” Howard Berry, principal of National Data Center Solutions, Avison Young, told Commercial Property Executive.

“In response, local governments in tier-one markets are re-examining their approval processes for data centers, potentially leading to extended wait times and increased developer scrutiny.”

Berry said that data center developers are facing significant delays in bringing their projects online. Utility electricity approval can take 12 to 18 months, and utility companies require up to 55 months to activate power.

“In some cases, speculative developments may wait up to six years before receiving power to their data centers, posing a major challenge for those looking to deploy and scale their operations quickly.”

The post AVAIO Digital to Build $3B Data Center Campus in Virginia appeared first on Commercial Property Executive.

Meta, the parent company of Facebook and Instagram, will build a $10 billion, 4 million-square-foot AI-optimized data center campus in Northeast Louisiana’s Richland Parish. Site work will begin later this month, with construction continuing through 2030.

The facility reportedly will be the largest of more than 20 Meta data centers around the world. It’s also one of the largest private capital investments in the state’s history.

Louisiana Economic Development did not reply to Commercial Property Executive’s request for additional information.

Meta’s largest data center campus in the world

The data center’s location is on a 2,250-acre megasite formerly known as Franklin Farms, between Rayville and Delhi, La., about 30 miles east of Monroe, La.

Roughly 20 years ago, local landowner George Franklin persuaded the state of Louisiana to purchase the land, essentially banking it for a large future economic development project, at that time envisioned to be an automobile plant, according to a report in Shreveport Times.

READ ALSO: The Dizzying Pace of Data Center Investment

Access to infrastructure and a reliable grid were among the reasons for Meta’s selection of the Richland Parish site, Director of Data Center Strategy Kevin Janda said in prepared remarks.

In that vein, regional electric utility Entergy plans to expand its generation capacity in the area, and Meta has committed to match its electricity use with 100 percent clean, renewable energy, up to a total of at least 1,500 MW.

In addition, the company has pledged to invest more than $200 million in local infrastructure improvements, including roads and water systems, and to invest in water restoration projects in Louisiana, with the goal of restoring more water than it consumes at the data center.

Big data plus big money

An in-depth CPE article examines, among other topics, the extent to which AI might be supplanting cloud computing as the main driver of data center development nationwide. The central role of access to electrical power is also highlighted.

No wonder, then, that the sector is seeing deals like the one in October, when Equinix launched a joint venture with partners GIC and the Canada Pension Plan Investment Board to raise in excess of $15 billion to develop hyperscale data centers across the U.S.

The post Meta Eyes $10B AI-Optimized Data Center Campus appeared first on Commercial Property Executive.

The National Security Memorandum on AI aims to accelerate AI development, supporting the next generation of supercomputers to come online. This could potentially unlock more incentives for developers, forge new partnerships and streamline processes for upgrading the energy grid that backs all these facilities.

Data centers have retained their competitive cap rates relative to the broader commercial real estate market, with fundamentals remaining strong throughout 2024 and suggesting even stronger performance going forward.

Construction across primary markets increased 70 percent—to nearly 3.9 gigawatts—in the first half of 2024, according to CBRE research. This, coupled with a record-low vacancy rate of 2.8 percent, shows the tremendous demand for IT capacity across the country. Nearly 80 percent of the 3,872 megawatts under construction are already preleased, CBRE Executive Managing Director for Data Center Solutions Pat Lynch underlined for Commercial Property Executive.

A growing share of this preleased capacity is directly tied to AI applications, but the majority remains cloud computing, which also plays a major role in developing new technologies. However, the race for AI has prompted more institutional investors to jump in this year, with a plethora of new massive data center investments from companies such as Prologis, Blackstone, BlackRock, Blue Owl Capital, Digital Realty, Equinix and many, many others.

It’s worth noting that most of these new investments are for developing new capacity. The AI-ready, hyperscale data center of the future will need more power, more space and more resilient infrastructure, which translates to more money being poured into the sector.

Building the data centers of the future

When it comes to how data centers are designed and developed, not much has changed. Third-party partners provide power, space, cooling and security as a service, but the scale has hit new levels. Everything is larger and denser, which comes with a unique set of challenges, according to Tom Traugott, senior vice president of strategy at EdgeCore Digital Infrastructure.

Securing power to support all this growth will remain the top consideration for data center development. Resilience, scale and simplicity will also be key. If a facility is too complex to develop, it usually diminishes its potential to scale, so considering the high-power requirements of AI and GPU clusters, developers must also accelerate delivery of large blocks of power capacity at the onset, as opposed to bringing power in use organically via slow ramp-up periods.

The amount of power per rack of IT equipment needed in a facility is rapidly increasing. An average data center today might be running traditional IT workloads at 6 to 10 kilowatts per rack. An AI application with high-performance servers, on the other hand, may require 40 to 50 kilowatts, with some going as high as 150 kilowatts per rack, said DC BLOX Vice President of Marketing & Product Management Bill Thomson.

The expected change in density means that the data center must be efficient with its initial workload, while also being able to scale in efficiency as density increases over time. This is beyond what air cooling technology can typically support, so technologies such as liquid cooling are also advancing rapidly. Closed-loop systems enable the reuse of process water, which effectively reduces the amount of water used overall. Traugott believes that these will not only become more common in 2025 but will likely be an industry standard for state-of-the-art facilities by 2026.

Furthermore, this new scenario has also prompted developers to seek advanced techniques that improve lead times, such as modular building blocks and manufacturing some components offsite. Another consequence is the migration to markets with cheaper power and land, and attractive tax incentives.

New clusters emerge

Outside the established Northern Virgnia area, the southern region is experiencing tremendous data center growth. CBRE data shows that Austin and San Antonio’s combined under-construction pipeline has more than quadrupled year-over-year, to 463 megawatts as of June. Great connectivity, nearby workforce, the low cost of reliable power and ample land for new construction will continue to drive interest in the Texas Triangle, according to Lynch.

But this is putting tremendous strain on the power grid. The Electric Reliability Council of Texas—which manages 90 percent of the load on the state’s power grid—estimates that electricity demand from customers such as data centers and cryptocurrency miners will total 54 billion kilowatt-hours in 2025, 60 percent more than the expected figure for 2024. This would represent around 10 percent of the total electricity consumption on the ERCOT grid for next year.

Generating more electricity is not the only challenge for data center developers. The next phase of growth is highly dependent on power transmission and distribution, as well.

In late 2023, DC BLOX completed the first cable landing station in the Mid-Atlantic in Myrtle Beach, S.C., housing three subsea cables owned by Google and Meta. Earlier this year, the company also completed a dark fiber network from the Myrtle Beach station to Atlanta, bringing global connectivity to the Southeast region and ultimately benefitting hyperscalers, international carriers, local enterprises and consumers, Thomson said.

In Georgia, the state’s largest electric utility provider landed $160 million in funding from the Department of Energy through the Grid Resilience and Innovation Partnerships Program to enhance flexibility and resilience. Earlier this year, Georgia Power received approval to expand its energy generation by 1.4 gigawatts through natural gas and solar battery facilities for future data center requirements.

DC BLOX is among several developers that have active projects in metro Atlanta. The company landed an anchor tenant at its Rockdale County, Ga., site and began construction, with 216 megawatts planned at full build-out. The company is also in active discussions with prospective customers for its Douglas County, Ga., project.

Access to capital remains, however, a key aspect for enabling power generation. Traugott believes private capital will need to enter the sector more meaningfully in 2025 and beyond, targeting utilities and grid reinforcement. “I could see more creative joint ventures or spinoffs emerge out of utilities to support more development,” he said.

EdgeCore secured a total of $4.2 billion in funding this year across multiple instances. Most recently, it landed $1.9 billion in equity toward the development of more hyperscale data centers in Mesa, Ariz., and Culpeper, Va. The latter is expected to become the next multi-gigawatt submarket in the state.

Given the massive power requirements, along with initiatives to reduce carbon emissions, data center developers are already looking at alternative sources. Geothermal energy is actively being used to power some of Meta’s data centers, for example. However, these advanced geothermal plants are mostly located in California, Utah and Nevada. So lately, operators have been looking at another source that has the potential to both meet demand and help with emissions: nuclear power.

What role will nuclear power play in the future of data centers?

Back in April, Amazon Web Services paid $650 million for Talen Energy’s 1,200-acre Cumulus data center campus in Berwick, Penn., which is directly connected to the nearby Susquehanna Steam Electric Station, the sixth-largest nuclear power plant in the U.S. AWS entered a power purchase agreement with Talen to power the campus with up to 960 megawatts for the next decade.

Besides a low carbon profile, nuclear power’s consistent baseload dynamic makes it a great option for the scaling needs of the next generation of data centers. It’s also the most stable source of clean energy, as it doesn’t depend on weather-related technologies—such as wind or solar—which have challenges regarding transmission and storage.

It looks like the data center sector has reached a point where these benefits outweigh the massive costs required to build and maintain a nuclear power plant.

In another deal last month, Constellation Energy signed a 20-year PPA with Microsoft, through which it aims to bring Unit 1 of the Three Mile Island facility back online. If the U.S. Nuclear Regulatory Commission approves the plan, Constellation expects to restart the reactor by 2028. This would also benefit Pennsylvania’s energy grid with an additional 800 megawatts, along with billions in tax revenue.

But not all operators and developers can afford a PPA with a large nuclear power plant. Nor are there enough of those in operation to make it a viable model for the sector at large.

READ ALSO: Why Big Data Centers Are Going Nuclear

Enter Last Energy—a Washington, D.C., based company that develops micro-modular nuclear power plants. It’s one among many similar companies that have begun to create tailored nuclear power solutions for private sector consumers.

The company wants to innovate on the power delivery model, Last Energy Senior Vice President of Commercial Michael Crabb told CPE. Its PWR-20 reactor can generate 20 megawatts and is fully deliverable in 24 months. Earlier this year, Last Energy showcased a life-size prototype at events in Houston and Washington, D.C., for data center executives and U.S. policymakers. The ultimate goal is to provide clean energy via an easily scalable model, quickly.

“One PWR-20 enables us to power that data center once it’s up and running, but a 20 MW increment and our focus on mass-manufacturability allows us to easily increase output as demand grows,” Crabb said.

Such micro reactors can also be more focused regionally. By operating outside the grid, these types of solutions can also alleviate concerns regarding over-straining energy infrastructure. Currently, Last Energy has PPAs for 80 units—1.6 gigawatts—almost half of which are for data center clients. Typical commitments range from 20 to 180 megawatts, meaning one to nine units to serve a given customer.

Another solution for reaching nuclear energy are small modular reactors, which typically have a capacity of a few hundred megawatts. These are different from what Last Energy is developing, both in size and technology. Some examples of companies producing SMRs include NuScale Power, Westinghouse Electric Power and Kairos Power—which earlier in October landed a PPA with Google for 500 megawatts.

The need for even more innovative solutions will only grow as data centers become an ever-increasing national economic and security priority. Therefore, expanding energy infrastructure is essential for growing economies, not only to support data centers, but also manufacturers, industrial sector companies, and the transition to electric vehicles, Traugott concluded.

Read the December 2024 issue of CPE.

The post Are Data Centers Immune to CRE Market Forces? appeared first on Commercial Property Executive.

Construction on the 22-acre first phase of the business park in Pittsburg, Calif., is expected to begin in the second quarter of 2025. The data center should be ready for energization in 2027. It will be capable of supporting cloud, high-performance computing, artificial intelligence, government and enterprise workloads.

The Perseus Data Center project will be on the site of the former municipal Delta View Golf Course in Pittsburg in Contra Costa County. Plans call for a three-story, 347,740-square-foot data center building, a substation and switching station to be erected north of the Contra Costa Canal. The site is located on Golf Club Road, south of West Leland Road. It is situated 45 miles from San Francisco and 60 miles from Santa Clara, Calif.

READ ALSO: The Dizzying Pace of Data Center Investment

The Pittsburg City Council signed off on the Pittsburg Technology Park Specific Plan, which will guide implementation of the three-phase development, on Nov. 18. The City Council approved the sale of part of the 175-acre golf course to Pittsburg Land Holdings, a subsidiary of Stamford, Conn.,-based ADP, for $16.7 million in July 2022. The remainder of the golf course, which was closed in 2018, will be used for recreation, including sports fields.

Details for the ADP’s plans for the subsequent two phases were not released at this time. However, documents filed with the City of Pittsburg noted Phases II and III will cover land south of the canal and “allow for the further development of the plan area as a dynamic employment hub and light industrial uses.”

Perseus highlights

According to ADP, a data center business managed by AVAIO Capital, the Perseus facility will exemplify the company’s focus on sustainability. It is situated in an area where more than 90 percent of the grid power is from zero carbon sources, wind and solar supplied by Pittsburg Power Co. ADP has secured commitments for recycled water that will cover all of its cooling and non-potable water needs and will also incorporate on-site solar. The facility has been designed to use biofuels for its back-up generators.

The company has also secured a commitment from Pacific Gas & Electric, with access to seven different 230 kV power lines. Through a partnership with Pittsburg Power Co., the project will save companies money by offering power rates competitive with Silicon Valley Power in Santa Clara, a non-for-profit municipal electric utility owned and operated by the City of Santa Clara. The Pittsburg Power Co. is a municipal joint powers agency established between the City of Pittsburg and the city’s Redevelopment Agency that performs as a municipal utility with the authority to provide wholesale and electric and gas services.

The post $800M Data Center Campus Gets Green Light appeared first on Commercial Property Executive.

TECfusions has obtained some $300 million for the development and expansion of its data center in Clarksville, Va.

The 15-year loan will fund the development’s Phase I buildout, as well as the company’s other key initiatives that include AI-ready infrastructure and sustainable power generation solutions.

The company started gathering funds for the project in January 2024. There are $160 million already allocated for construction, while the remainder will be used for the completion of the project’s Phase I.

Plans call for the development of four data halls with a combined capacity of 37.5 megawatts. The third one, dubbed C-Hall, came online in September, while the fourth one, D-Hall, is currently underway and expected to reach completion by February 2025.

The expansion of the Clarksville data center comes in response to higher capacity needs from one of its key tenants. In October, TensorWave leased 1 gigawatt of AI infrastructure capacity at the facility, marking one of the largest commitments in the sector.

READ ALSO: More Data Centers, Please!

The 22.5-acre property is at 250 Burlington Drive. TECfusions acquired the 196,000-square-foot facility with 500 kilowatts already live and immediately started upgrading it. According to the company’s website, the data center has 80 megawatts already leased and the company is looking to bring the campus to a full site capacity of 220 megawatts.

The company also recently acquired 66 acres for the expansion of the campus, that will also include some houses for people working on the development, according to Data Centre Dynamics. The same source reported that the city will provide 20,000 gallons of water and sewer per day for the project.

AI drives data center demand

AI capital expenditures in recent years amounted to more than $300 billion, with investment accelerating in 2024, according to a recent JLL Data Center Report. AI represented about 20 percent of the new data center demand in 2023 and will continue to fuel this demand going forward.

However, development is going at a faster pace than the power grid can support, especially with construction having increased in secondary markets. With vacancy levels having reached record lows, nearly all data center projects are already preleased ahead of completion, and this trend expected to continue in the next few years.

Last month, Cologix obtained significant funds to finance its upcoming data center developments. Through a mix of debt and equity, the company secured $1.5 billion for its campuses in Ashburn, Va., Columbus, Ohio, and Montréal.

The post TECfusions Lands $300M for Virginia Data Center appeared first on Commercial Property Executive.

The expansion, part of a $7 billion investment, marks the network-neutral interconnection and hyperscale edge data center company’s continued presence in Central Ohio’s digital infrastructure.

The campus will feature eight AI-ready data centers when fully built-out, delivering a potential 800 MW of scalable capacity across 2 million square feet.

“This new 800 MW data center campus will help us meet the growing demand for AI-ready infrastructure,” Chris Heinrich, chief revenue officer at Cologix, told Commercial Property Executive.

Central Ohio is a premier area for data center expansion thanks to its strategic location and robust infrastructure, Heinrich explained. “The region’s accelerating tech ecosystem and highly skilled workforce make it an ideal hub for innovation and growth. Breaking ground in 2025, this campus will mark the next step in our commitment to driving innovation and enabling our customers’ digital transformation.”

READ ALSO: Getting in the Heads of Data Center Tenants

Heinrich said Cologix recognized Central Ohio’s potential over a decade ago, identifying it as a strategic hub for digital growth. Since then, it has become the largest colocation provider in the region.

Cologix operates four data centers in Columbus with a combined footprint of 500,000 square feet and 80 MW of power.

“This area is rapidly becoming the digital heartland for tech businesses,” Heinrich said. “As demand for AI-ready infrastructure grows, Cologix sees even more opportunities to expand its colocation and interconnection footprint to help power customers across North America.”

Columbus’ data center market expansion

The Columbus data center market has experienced tremendous growth over the last five years, far exceeding the national average, according to Andrew Batson, head of U.S. data center research for JLL.

Across colocation and hyperscale facilities, the Columbus market has grown from 160 MW in 2019 to 2,100 MW in 2024, increasing 13 times in just five years.

“Columbus has many advantages working for it: abundant and affordable land, power rates below the national average, proximity to the national long-haul fiber-optic network, a growing labor pool, and a central Midwest location with seamless transportation options,” Batson said.

Before the surge in data center development in Columbus several years ago, the region had excess power capacity and offered relatively quick connections to the grid, Batson added. “Power capacity has become more constrained, and connection lead times have increased. Still, the current conditions in the region are on par with what data center developers and operators will find in other markets across the US.”

Columbus began to grow at scale in the late 2010s as a hyperscale market. Similar to the growth trajectory of other data center markets, one large hyperscale investment attracted other hyperscalers, which in turn attracted a number of colocation providers.

Columbus has since grown into a complete data center ecosystem with over 2.1 GW commissioned facilities, a trained data center labor force, and roughly 6 GW of land-banked sites.

Vantage Data Centers is another firm that has invested in the Columbus area. Last month, the company made a $2 billion investment and broke ground on a 192-megawatt campus dubbed OH1.

The facility will be more than 1.5 million square feet on 70 acres in New Albany, a suburb northeast of Columbus. Upon completion, it will total more than 1.5 million square feet and be designed to achieve LEED Silver certification.

The post Cologix Plans $7B Data Center Campus appeared first on Commercial Property Executive.

Watch the webinar.

The whirlwind of 2024 is coming to a close. Commercial real estate went through rate increases, cuts, an election, economic uncertainty and volatility in the capital markets. And that’s just scratching this year’s surface. Yet, overall market fundamentals are looking up.

As 2025 approaches, Commercial Property Executive brought together some of the nation’s top CRE experts. In CPE’s 2025 Outlook: Navigating the New Year webinar, moderated by Editorial Director Suzann Silverman, executives shared expectations about valuations and transactions, as well as deals that highlighted the current market.

To set the stage, Ryan Severino, chief economist at BGO, addressed the “800-pound gorilla in the room:” interest rates. After the long series of hikes that have been recently followed by two cuts, Severino observed that inflation has slowed considerably and that the worst is likely in the rearview mirror.

READ ALSO: Why Aren’t Mortgage Rates Dropping After Fed Rate Cuts?

All things considered, “The economy has been nothing short of spectacular,” Severino stated. There is also a general confidence that, over the next 12 to 24 months, the Federal Reserve will pull the figure closer to a “neutral rate.” The hoped effect would be pulling investors off of the sidelines and boosting deal volume.

Finding investors

Transaction activity should start to tick up industry-wide in 2025, it was widely agreed. But it’s essential to get lenders and capital investors back in the game so deals pencil. Shlomi Ronen, managing principal & founder at Dekel Capital, said that more opportunistic and value-add capital is likely to pop up.

“If you’ve got the opportunistic capital right now, and can be somewhat of a contrarian, investing in ground-up multifamily development—which is a space we’re leaning into right now—is a great place to be,” Ronen added. Taking a longer-term view and buying office assets could offer similar opportunities.

READ ALSO: Life Cos. Drive More Lending, Banks Take Back Seat

Pension funds have had a tough couple of real estate years, yet opportunity is on the way, predicted Stephen Quazzo, co-founder & CEO of Pearlmark Real Estate.

“There are some rays of sunshine as we look out into 2025,” he said. “You have this denominator effect: The stock market continues to boom; the real estate allocation is a lower percentage. So I think they certainly have room in their allocations.”

For assets looking to recapitalize, equity from long-term investors such as pension funds will continue to be a good source. Foreign lenders may be another. Alexandra Levy, Americas head of debt capital markets at LaSalle Investment Management, said that while it’s difficult to generalize sentiment due to differing regulations, there are signs from overseas.

“We are continuing to see international lender interest at the fund-level financing,” Levy said. “There’s been a shift from property level to fund level. It’s a way to continue to support real estate, either through subscription lines or repo facilities for back leverage, while not having the direct exposure.”

International banks are also still lending into national markets on a property-level basis, Levy noted.

Impacts of the election on CRE

The other 800-pound gorilla in the room: the presidential election. But does it really impact CRE? Barbi Reuter, CEO & Principal of Cushman & Wakefield | PICOR, doesn’t think so. Election cycles and property performance don’t have much of a correlation, according to her company’s data mapping. While the impact on fundamentals is likely minor, she noted that solid GDP growth could positively impact leasing.

“In our area, we’ll be looking if potential changes in immigration policy could affect labor shortages,” Reuter said. “Certainly, border states and others are impacted.”

READ ALSO: Will CRE Market Conditions Improve?

Local economic policy changes could also impact markets. For example, municipalities and states have to respond and deliver—individually—on things such as clean energy, zoning initiatives and power infrastructure, which could impact CRE on local levels, Reuter noted.

Quazzo agreed that, from an investment standpoint, some markets are more or less attractive due to their local policies. Specifically, property tax rates and transfer taxes are factors to consider.

A positive 2025 CRE outlook

Considering the strong economy going into 2025, Severino said that CRE is starting to see a shift. He noted that, despite sentiment being a more-or-less “soft indicator” in the market, there is a positive anticipation of where rates are headed. This slide away from a more negative outlook is, in itself, removing a major headwind.

“You’re starting to see people thinking a little more aggressively down the road and about deploying more capital once we’re in a different interest rate environment–six, 12, 18 months from where we are now,” Severino said.

LISTEN TO: CRE Sentiment at Best Level in 2 Years

Over that same timeline, Ronen anticipates a lot of pressure on debt funds and distressed assets. The highly discussed wave of approaching maturities is going to continue to apply this pressure and ultimately lead to more transactions.

“Once we see that transaction volume pick up, we’re going to get a market clearing price and cap rates for multifamily, and all the other asset classes, that will then help spur other investment,” Ronen reasoned. That’s the big question right now: Where are cap rates on these assets?

A recent Cushman & Wakefield report showed that about 50 percent of the distress pipeline is in office, Reuter noted. While this is potentially unsurprising, there is a silver lining.

“The rate of growth was slowest for distress that it’s been in two years,” Reuter mentioned. “That’s a positive indicator.”

When it comes to distress, Levy said, it is important to consider the one caused by higher rates and the refinancing gap.  

“Whether we believe the forward curve or not, as rates begin to pull in, that refinance gap lessens,” Levy continued. As more deals come to market, it will be interesting to see which are distressed and which are related to smoother market dynamics.

The post 2025 CRE Outlook: The Year Ahead appeared first on Commercial Property Executive.

Patmos is expanding its Kansas City, Mo., presence with a second data center campus. The company is spending $1 billion to repurpose a vacant printing plant, formerly used by Kansas City Star, into a 100-megawatt facility.

The data center and cloud provider will oversee each development phase in-house and expects to have the first 5 megawatts online next month. Over a period of 18 months, the firm plans to have 40 megawatts ready.

Patmos’ new facility at 1601 McGee St. will have liquid and immersion cooling systems, along with rear-door heat exchangers.

The property is roughly 1 mile away from the company’s first Kansas City data center, a 4-megawatt facility at 1325 Tracy Ave. Patmos also has data centers in Dallas and Phoenix.

READ ALSO: How AI Is Pushing Cloud Data Center Providers to Scale Up

Ambassador Hospitality LLC owns the building, having picked it up in 2019 for $30.1 million, according to CommercialEdge data. Initially, Kansas City Star had plans to lease back the property for another 15 years, but it moved out in 2022, and the asset remained vacant until Patmos signed the agreement to occupy it, Kansas City Business Journal reported.

Midwest data center sector grows

Kansas City is one of the fastest-growing tech hubs in the U.S. The metro’s low natural disaster risk together with its affordable green energy and robust fiber optic infrastructure contribute to its increased popularity among developers, which in turn helps grow data center talent in the region.

On a larger scale, the Midwest is attracting more and more investment from the data center sector. Last month, Vantage Data Centers begun work on a $2 billion development, in Columbus, Ohio—its first project in the region.

In Chicago, one of the primary data center markets, CyrusOne started construction on its second data center campus. Plans call for two buildings, encompassing 446,000 square feet, which will deliver an initial 40 megawatts.

The post Patmos to Build $1B Kansas City Data Center appeared first on Commercial Property Executive.

No property type has gone from niche to institutional as fast as data centers, and none has changed so quickly.

One of the biggest shifts over the past 10 years has been the switch from multi-tenant and multi-story co-location facilities in urban settings to single-customer, single-story facilities in the suburbs.

“Pretty much everything we’re doing is a single customer per building if not a single customer for the entire campus,” said IPI Partners Managing Director Matt Weisberg during a data center session at the ULI fall conference in Las Vegas. “The density and economies of scale and everything really necessitate going with that.”

READ ALSO: Getting in the Heads of Data Center Tenants

Therefore, capital requirements for the core and shell and the MEP demands have risen “dramatically,” Weisberg added. “(With) our latest generation of buildings we’re doing, we easily have facilities that are going over $1 billion per facility because of the extreme density right now. And so capitalizing that…is getting much more interesting than it was at the very beginning.”

Fortunately, the amount of capital converging on the sector has increased significantly. The current wave of investment was ignited during Covid-19 when data centers were responsible for keeping us online for entertainment, shopping, work and education, according to Kristina Metzger, vice chair of CBRE Data Center Capital Markets.

“And suddenly it clicked for so many investors and individuals that no matter what’s going on in the macro economy, it doesn’t change our need to access data centers and information,” said Metzger said.

During that period, there was a 46 percent increase in “MDAs” (main distribution centers), CBRE found. The advent of AI created another push for investors.

Diverse strategies and investment types

Investors come to data centers with a variety of strategies—from development to core, and data centers offer diversity because they are not always thought of as real estate, Metzger noted. They are also considered infrastructure, “TMT” (technology, infrastructure and telecommunications) and project finance.

Meanwhile, investors are willing to write bigger checks. Five years ago, Metzger explained, there was a real bifurcation between powered shell investments (you provide the core and shell and some infrastructure while the tenant builds out the interior and critical infrastructure, maintains the space and operates it) and turnkey investments (you completely build out the space, maintain it and most likely operate it). Investors tended to favor shell investments as they learned the industry. As the property type has “institutionalized” and investors have grown more comfortable, there is now great interest in both powered shells and the more capital-intensive turnkey projects.

READ ALSO: Capital Is Ready for the Next Upcycle

The cost difference between turnkey and shell is about three to one, Weisberg noted. But demand for this data center type tends to outweigh power shell because many tenants are growing rapidly and don’t have the capacity to build out their own projects.

Not without risks

While the growth potential for data centers seems limitless, there are risks, including electric power, capital expenditures, economies of scale, obsolescence and environmental impacts, according to ULI/PwC’s Emerging Trends in real estate report.

Rob Morris, CEO of Skybox Data Centers, would put personnel. “There’s so few people that know how to design, build and operate data centers in the U.S.,” he told the audience. “So we’re just gasping for air in terms of finding, training and building new professionals in the space that can help us to scale because that takes some time.”

The post ULI Special Report: The Dizzying Pace of Data Center Investment appeared first on Commercial Property Executive.

The build-outs are at the company’s campuses in various core markets, including Ashburn, Va., Columbus, Ohio, and Montréal. The new developments will be on recently acquired sites in Columbus, Des Moines, Iowa, and Vancouver, B.C.

The capital includes a $1 billion revolving multi-asset development debt facility and an additional $500 million in equity from both new and existing investors. The debt facility will provide Cologix with the flexibility to add new sites over time as needed. Both debt and equity raises were the result of strong investor interest, and were both oversubscribed, according to Cologix.

READ ALSO: How AI Is Pushing Cloud Data Center Providers to Scale Up

This new financing follows the company’s $1.13 billion and Can$1.07 billion in asset-backed securitizations beginning in 2021, along with $3 billion in equity recapitalization in 2022. Those infusions have fueled the company’s growth in recent years.

Cologix is in active growth mode. In June, the company acquired two data centers in Iowa from Connect Des Moines, marking its entry into the Des Moines market. Cologix also inked a deal to buy additional land in that market that will enable it to build more capacity to meet growing demand.

U.S. data center market seeing monster growth

Overall, the data center sector continues to expand as growth in AI and other power-intensive computing ups demand. Data center supply in primary U.S. markets increased by 10 percent, or 515 MW, during the first half of 2024 and by 24 percent, or 1,100.5 MW, year-over-year, according to a CBRE report. The vacancy rate in primary markets fell to a record-low 2.8 percent at the end of June, down from 3.3 percent a year earlier.

A record 3,871.8 MW of capacity was under construction during H1 2024, up by 69 percent from a year earlier, CBRE noted. But such growth has a downside, as available power isn’t always there to support the development, meaning delays for construction completions.

Nearly 80 percent, or 3,056.4 MW, of the underway data centers were preleased. CBRE reported. Cloud providers continued to lease most capacity, but AI providers also accounted for a significant amount of demand. 

Northern Virginia remained by far the largest market, followed by Dallas-Fort Worth, Chicago, Phoenix and Silicon Valley. Power availability is the top consideration in site selection.

The post Cologix Raises $1.5B for Data Center Development appeared first on Commercial Property Executive.

Vantage Data Centers has entered the Midwest with a $2 billion investment. The company has broken ground on a 192-megawatt campus, with Tuner Construction serving as general contractor.

Dubbed OH1, the facility will be situated on 70 acres in New Albany, a suburb northeast of Columbus, Ohio. Upon completion, it will total more than 1.5 million square feet.

Designed to achieve LEED Silver certification, OH1 will be constructed to meet the company’s sustainability blueprint, which is targeting net zero operational carbon emissions by 2030. The campus will employ more than 1,500 people through construction and long-term operations.

Ohio is the fifth market in Vantage’s national hyperscale portfolio. The first building on the new campus is slated to open in late 2025.

Alongside the development, Vantage is partnering with the New Albany Community Foundation and the Columbus State Community College Foundation. It aims to positively impact the community through influencing its talent, health, housing affordability, job creation and education.

Earlier this year, Vantage completed a $9.2 billion equity raise to fund its growth nationwide and in the EMEA region. The fundraise was oversubscribed by $2.8 billion, a sign of global investors’ bullishness on the data center industry. Vantage estimated that the funding would drive some $30 billion of additional development, accelerating its capacity to partner with global hyperscalers.

The post Vantage Starts $2B Ohio Data Center Project appeared first on Commercial Property Executive.

Sabey Data Centers has completed the first building of SDC Austin, its new data center campus in Round Rock, Texas. The 430,000-square-foot facility broke ground in July 2022.

SDC Austin is poised to maximize data center space while minimizing the construction footprint, ensuring scalability for deployments of all sizes.

Upon full build-out, the facility will provide up to 84 MW of critical power capacity. The project is also engineered to accommodate liquid cooling and high-density computing environments, supporting up to 200 kW per cabinet.

READ ALSO: Meeting the Insatiable Demand for Data Centers

The completion comes on the heels of the developer’s announcement that The Texas Advanced Computing Center chose Sabey Data Centers as its colocation partner for the Horizon supercomputer, which will be deployed in Round Rock. Horizon is set to be the largest academic supercomputer dedicated to open-scientific research in the National Science Foundation’s portfolio.

Part of a larger campus

The two-building campus is rising on the former site of a Sears call center. The other facility will measure about 105,000 square feet, according to Community Impact.

SDC Austin occupies 40 acres at 1300 Louis Henna Blvd., less than 4 miles from downtown Round Rock. Downtown Austin is 18 miles away, while the Austin-Bergstrom International Airport is some 23 miles southwest.

In February 2022, the Round Rock City Council approved an economic development agreement that grants tax incentives to the developer. Under the terms of the agreement, Sabey is required to invest at least $185 million in property enhancements and $5 million in new equipment and business personal property. The company must also create a minimum of 20 primary jobs within a five-year period.

North America saw a 10 percent increase in supply in primary markets in the first half of this year, accounting for about 515 MW, according to a CBRE report. The under-construction pipeline was up by 69 percent year-over-year. Additionally, Austin and San Antonio’s combined underway projects more than quadrupled from a year ago to 463.5 MW.

The post Sabey Completes 1st Building at Austin Data Center Campus appeared first on Commercial Property Executive.

DataBank has obtained $2 billion in equity raise led by AustralianSuper, which committed $1.5 billion. The company also secured an additional $483 million in commitments from existing investors. The deal is scheduled to close by the end of the year.

This marks AustralianSuper’s first investment in the U.S. and the second alongside existing DataBank investor DigitalBridge. Upon closing, the Australian fund will acquire a substantial minority stake in DataBank and will join the company’s board of directors.

READ ALSO: How AI Is Pushing Cloud Data Center Providers to Scale Up

The investment will fund the construction of more than 850 MW of data center capacity across DataBank’s portfolio, as well as diversify the investor’s global digital infrastructure exposure.

Proceeds will finance the developer’s inventory expansion involving three new campuses announced over the last months. These developments include a 480 MW campus near Dallas, a 192 MW campus in Culpeper, Va., and a 120 MW campus in the Atlanta MSA.

BofA Securities and Citizens Capital Markets Inc. acted as financial advisors for DataBank. Citi acted as financial advisor for AustralianSuper. Simpson Thacher & Bartlett LLP acted as legal counsel to DataBank and Milbank LLP acted as legal counsel to AustralianSuper.

In the last year, DataBank raised more than $4 billion in debt and equity. In April, the company established a $725 million credit facility to finance ongoing and future data center developments in existing markets. The firm’s portfolio consists of upwards of 65 data centers across more than 27 markets.

DataBank’s underway data centers

DataBank announced the construction of a 480 MW data center campus near Dallas earlier this fall. Set to be the firm’s largest project to date, the development will comprise eight two-story buildings across 292 acres and will be constructed in two phases.

The Culpeper, Va., project was announced last November. Plans called for a campus to host up to three two-story data centers and 1.4 million square feet of space. The site would also include a 300 MW on-site substation from Dominion Energy.

That same month, DataBank acquired 95 acres in Lithia Springs, Ga., for its new Atlanta-area data center campus. Dubbed ATL5, the 120 MW project would comprise two multi-story buildings for hyperscale developments.

The post DataBank Raises $2B in Equity appeared first on Commercial Property Executive.

Crusoe Energy Systems has formed a $3.4 billion joint venture with Blue Owl Capital and Primary Digital Infrastructure to fund the development of a 206 MW data center outside Abilene, Texas. The developer had announced the purpose-built project taking shape at the Lancium Clean Campus in July.

Funds managed by Blue Owl’s Real Estate platform and Primary Digital Infrastructure will jointly sponsor the 998,000-square-foot, two-building data center being designed, developed and operated by Crusoe. Newmark served as advisor to the partnership. Primary Digital Infrastructure is an advisor to Crusoe.

Data center details

The data center will be a build-to-suit facility capable of supporting high energy density IT applications. The project will incorporate a design to support AI workloads at an industry-leading scale, according to Crusoe.

The design will be optimized for direct-to-chip liquid cooling and also accommodate air cooling. Once completed, the data center will be able to operate up to 100,000 GPUs on a single integrated network fabric. The site is expected to be powered by on- and off-site renewable resources, including surrounding wind developments and a possible large-scale on-site solar installation.

A Fortune 100 hyperscale tenant has agreed to a long-term lease for the entire facility, with occupancy set to begin in the second half of 2025. Chase Lochmiller, CEO & co-founder of Crusoe, said in prepared remarks they designed the data center to enable the largest cluster of GPUs and meet the rapidly expanding demand for purpose-built facilities for a market that will increasingly be powered by AI.

READ ALSO: Getting in the Heads of Data Center Tenants

This is the first phase of Crusoe’s development which will eventually expand to 1.2 GW capacity at the Lancium campus. The data center is expected to contribute nearly $1 billion to the local economy over the next 20 years, creating almost 100 local jobs.

Lancium broke ground on the Abilene campus in late 2022 and is projected to spend approximately $2.4 billion in real property improvements at the site, according to Data Center Dynamics. The 1,100-acre property currently has 200 MW of data center capacity, with 1,000 MW to be energized by 2025.

New focus for Blue Owl

The Abilene project is not the only recent digital infrastructure investment by Blue Owl, an alternative asset manager with more than $192 billion in assets under management.

In September, the firm formed a $5 billion joint venture with Chirisa Technology Parks and PowerHouse Data Centers to develop large-scale AI/HPC data centers for CoreWeave Inc. across the U.S. on a build-to-suit basis. The partnership expects to deploy up to $5 billion of capital.

And, last week, the New York-based firm agreed to acquire data center investment firm IPI Partners, the parent of data center companies Stack Infrastructure and Radius DC, for $1 billion. The IPI platform is one of the largest private U.S.-based data center investors with a portfolio of 82 data centers comprising more than 2.2 GWs of capacity across the globe.

Blue Owl said the acquisition will add about $10.5 billion in assets under management and further augment its digital infrastructure strategy. The deal is expected to close later this year or in the first quarter of 2025.

The post $3.4B Joint Venture Funds AI Data Center Development appeared first on Commercial Property Executive.

According to a CBRE global data center trends report, in the first quarter of 2024 the national data center inventory grew 24.4 percent on a year-over-year basis. During the same period, vacancy rates hit new lows across the major data center markets—Northern Virginia, Dallas-Fort Worth, Chicago and Silicon Valley.

With stiff competition and an extremely tight market, brokers have to be at the top of their game to get data center tenants what they want. But what exactly does this entail?

What’s changed

While many of the things data center tenants want have remained the same, others have significantly changed in recent years. Among those that have changed, power requirements is perhaps the biggest.

“If one of my clients was looking at space today versus 10 years ago, the requirement for power is considerably greater,” Bo Bond, executive managing director in Cushman & Wakefield’s Global Data Center Advisory Group, told Commercial Property Executive.

Another thing that has shifted is preferences, or risk tolerance, surrounding forms of power. Tenants today might accept a less distributed form of power, since platforms allow for more ways to backup systems and more redundancy tolerance. Previously, redundancy of mechanical and electrical systems was less distributed in nature, Bond mentioned.

Howard Berry, principal in charge of national data center solutions at Avison Young, similarly noted redundancy as a top concern as some applications require strict uptime guarantees.

“Tenants expect their data center providers to prioritize reliability and invest in robust infrastructure, often opting for N+1 configurations to ensure seamless operations,” he said.

READ ALSO: More Data Centers, Please!

Another recent shift, according to Berry, is tenants expecting that data center landlords or operators will negotiate tax incentives on their behalf.

“Historically, providers have not been directly involved in this process, but now users are seeking their assistance to secure these incentives upfront,” Berry noted, pointing out that tenants are seeking more comprehensive solutions from providers.

In addition to preserving their bottom line, more data center tenants are focusing on improved energy efficiency and furthering their ESG initiatives.

“Tenants are now prioritizing data centers that leverage renewable energy sources such as solar and wind to reduce their carbon footprint,” said Joseph Jemal, director of capital markets at KSR.

Recurring priorities

Location is still a top priority for data center companies. “Tenants prioritize proximity to transportation hubs, business centers and access to reliable power and fiber infrastructure,” Jemal said, adding that room for future expansion is also a key consideration.  

And of course, access to the cloud is more important than ever, Bond pointed out. With cloud companies—the Amazons and Googles and Microsofts of the world—continuing to grow, cloud access is more prolific than ever.

Then there are the physical space requirements, which also remain crucial. According to Berry, when it comes to selecting prime space, data center tenants mainly prioritize power per rack and cooling infrastructure.

“These critical components ensure the reliability and efficiency of their operations,” Berry said. “Furthermore, tenants seek data centers with flexible design capabilities, allowing them to adapt to their specific needs and workloads.”

Data center trends to watch

With the rise of technology, data centers are expected to grow exponentially, and the capital markets are continuing to invest significant amounts into the space.

For now, it’s no easy task finding availability for tenants in existing buildings and the same is true for those still in development, Bond said. As a result, data center owners have been afforded significant rent increases. He anticipates that on the supply side, these constraints are likely to continue.

READ ALSO: How AI Is Pushing Cloud Data Center Providers to Scale Up

“Right now the market in the U.S. is arguably anywhere from 5 to 2 percent vacancy,” Bond said. “It’s a landlord’s market. For that reason, many of the facilities coming out of the ground today are being preleased. There’s a significant supply constraint.”

Another factor to watch is the expanding role of AI within the data center space.

“As technology evolves, these functionalities will enhance the efficiency and effectiveness of data center operations,” Jemal noted.

But equally notable is the growing influence of local and state governments and power providers around such technologies, Berry mentioned.

“State governments are starting to introduce regulations around AI, with those that pioneer legislation likely to impact the growth of AI in their respective states,” he said. “Meanwhile, local governments that offer sales tax incentives or already have them in place for data center equipment are likely to attract hyperscale development.”

Advice for data center brokers

Jemal’s advice to anyone looking to earn respect in the data center brokerage industry is to master every aspect of it.

“To succeed in this sector, you need to truly understand the specifics of the business,” he said. “It’s not just about sharing every available opportunity with the client—it’s about knowing what makes a data center exceptional.”

For Berry, when it comes to getting in the heads of hyperscale tenants, its essential to focus on the financial implications of IT expenses.  

“With IT costs on the rise, hyperscale tenants are under pressure to optimize their data compute and storage strategies to avoid the high costs associated with cloud services,” he said. “By taking the time to understand the financial benefits of a well-planned data center strategy, brokers can help tenants develop a comprehensive plan that saves them millions of dollars.”

To do this a broker needs to conduct a deep dive into each tenant’s requirements. Only then can a broker provide tailored and informed solutions that drive real and impactful results.

Further, people may assume that all data centers are alike, Bond said, but that couldn’t be further from the truth. Just like a mom-and-pop barber has differing needs from a large department store hair salon, data centers are exponentially different in their needs as well, he pointed out. Brokers need to understand these different requirements to truly fulfill their role.

For Bond, it takes skills from multiple disciplines to be a great data center broker—from being a good land broker and understanding highly complex leases to learning varying degrees of scope and keeping up with new tech—you have to be able to do it all.

“What I thoroughly enjoy about this space is that technology changes so rapidly,” Bond said. “We have already seen so much change, and we all predict that there will continue to be change. It takes somebody that thrives off of the ever-evolving technological advancements in the world.”

The post Getting in the Heads of Data Center Tenants appeared first on Commercial Property Executive.

CyrusOne has broken ground on its second data center campus in Aurora, Ill., a Chicago submarket. The project is set to comprise two buildings totaling 446,000 square feet and will deliver an initial IT capacity of 40 MW with scalable capacity to meet future growth needs.

Partners on the project include ComEd, which will help deliver the needed electrical infrastructure. The development is expected to cost about $350 million and is scheduled to come online in two years.

Owned by KKR and Global Infrastructure Partners, CyrusOne currently operates 24 sites across the U.S. The new data center campus marks a key expansion for the REIT in Illinois, where its total capital investments have now surpassed $1 billion.

READ ALSO: More Data Centers, Please!

The development is taking shape at 2725 Bilter Road, just off Interstate 88. Downtown Chicago is 34 miles away, while downtown Aurora is some 10 miles southwest.

The data center’s site was initially designated for hospitality and retail uses. Earlier this year, CyrusOne and the city of Aurora reached an agreement, in which the company paid $15.5 million to compensate for the alteration in land use.

The campus will also feature two 350-foot towers, which will accommodate a collaboration between the developer, CME Group and Google, according to Yahoo Finance. The buildings are set to house financial trading systems for CME customers, which are currently operating in CyrusOne’s other Aurora data center.

More data centers to come online in Chicagoland

According to a JLL midyear report on U.S. colocation data centers, Chicago had about 818 MW completed in the first half of this year. Additionally, there were 733 MW under construction, with 1,222 MW in planning stages. A total of 466 MW were absorbed in the first six months of this year.

In June, Compass Datacenters began work on a hyperscale data center campus in Hoffman Estates, Ill. The project will include five buildings and will be the firm’s first hyperscale campus in the state. The development’s total cost is estimated at about $10 billion.

The post CyrusOne Kicks Off Chicago Data Center Campus appeared first on Commercial Property Executive.

Equinix has formed a new joint venture with GIC and the Canada Pension Plan Investment Board, intending to raise more than $15 billion for the development of hyperscale data centers. The partnership will acquire land across the U.S. where it will build campuses of at least 100 megawatts and expects to reach a total capacity of 1.5 gigawatts.

Under the terms of this agreement, GIC—Singapore’s sovereign wealth fund—and CPP Investments will each control a 37.5 percent equity interest in the venture, with the remaining 25 percent controlled by Equinix.

Morgan Stanley & Co. LLC served as exclusive financial advisor for Equinix, while Latham & Watkins LLP worked on behalf of CPP Investments. Closing is expected in the fourth quarter, subject to regulatory approvals.

READ ALSO: More Data Centers, Please!

Equinix seeks to expand its xScale product, which is tailored for the unique workloads of large cloud service providers and other hyperscale customers, including AI applications. Although it is present in virtually all major U.S. markets, the California-based REIT currently has only one xScale data center in the nation, in San Jose, Calif. In April, it entered a $600 million joint venture with PGIM for its development.

According to its second quarter earnings report, the global data center company also acquired a 200-acre parcel in metro Atlanta, where it will develop a multihundred-megawatt xScale campus. The firm aims to build all its xScale facilities to meet LEED certification.

An $8 billion global footprint

Equinix’s existing xScale portfolio totals more than $8 billion in commitments. This includes 35 hyperscale facilities in various stages of development, encompassing more than 725 megawatts of capacity at full build-out.

The REIT has multiple similar partnerships across Europe, Asia-Pacific and the Americas. This is the first time it partnered with CPP Investments, but it has a long-standing relationship with GIC. It first joined forces with the Singaporean sovereign wealth fund in 2019, and in 2020 it established another $1 billion joint venture to develop data centers in Japan. Another, $3.9 billion global venture followed in 2021, and a few others since then.

AI accelerates investments in digital infrastructure

The global race to accommodate AI deployments has prompted multiple institutional investors to pour billions in the hyperscale data center market, such as Prologis and Blackstone. And this year has seen a few major deals take shape.

Most recently, Blue Owl Capital, Chirisa Technology Parks and PowerHouse Data Centers formed a $5 billion partnership to develop AI and HPC facilities across the U.S. The same month, EdgeCore secured $1.9 billion in equity, its third round of financing this year.

The above were on the heels of many other similar 2024 deals, with investments continuing to grow. In a CBRE investor survey released in June, 97 percent of respondents said they plan to increase their capital deployments in the data center sector this year. Furthermore, 92 percent of them expect to invest at least $100 million, 44 percent aimed for $500 million and up, while 17 percent said they will pour more than $2 billion in such assets.

The post Equinix Launches $15B JV for Hyperscale Data Centers appeared first on Commercial Property Executive.

Leading data center management and construction professionals discussed the situation during a session at the Blueprint Conference this week in Las Vegas last week.

According to Steve Ruby, chief innovation officer at McKinstry, manufacturing part of the data center construction components offsite would be beneficial.

“It’s quicker and faster to do that because you’re in a controlled environment. This can also help because you can construct them in areas where labor exists, which addresses the overall construction labor shortage,” Ruby said.

Joe Cannon, senior project manager at McCarthy Building Cos., recommended that developers find a repeatable construction design. This would be more efficient and allow more data centers to be built quickly and easily.

READ ALSO: Prologis, Blackstone Double Down on Data Centers, but Hurdles Remain

Jeff Sprau, CEO of Legence, said the industry needs standardization in its product and product operations. “This would help employees like facilities managers to move more effectively from one project to another.”

Labor, energy constraints

Because the hiring dilemma is real, according to a recent report from JLL.

“We have to pay an extra $15 an hour to hire electricians,” Cannon said. “To create a better culture for the construction workers, we hold raffles in the morning and give away tools as prizes. We bring ice cream trucks to the site. It all helps.”

The panel said some data center developers are building them as cheaply as possible, keeping costs in mind, in anticipation that jurisdictions will eventually set more carbon-friendly regulations.

In the meantime, local officials happily count the property tax revenue they generate when each center is built.

“We’ve tried to build with recycled concrete, but we’re not required to,” Cannon said. “Addressing data centers’ carbon footprint needs to be discussed, but once it is, it won’t change overnight.”

Meanwhile, Ruby said there aren’t enough electricity grid substations to handle this high volume.

“They can’t build more of them fast enough,” he said.

When it comes to saving energy, Sprau said, “Every little bit of energy conservation helps the grid. But this is not just a data center thing; the commercial real estate industry needs to keep thinking about how they can be more efficient with the energy they need.”

The post Blueprint Special Report: Meeting the Insatiable Demand for Data Centers appeared first on Commercial Property Executive.

Caddis Cloud Solutions is a newly formed advisory firm specializing in data center development, cloud capacity sourcing and end-user deployment. Previously known as CloudSphere Consulting, the company recently launched its new brand under the guidance of Founder & CEO Scott Jarnagin.

With more than 25 years of experience in cloud infrastructure services, Jarnagin has managed projects across various sectors, from data centers to health care and call centers. Now, he’s positioning his company to enter emerging markets and capitalize on the growing need for AI-driven infrastructure.

We asked Jarnagin to expand on how he’s responding to shifts in client demand, considering the growing influence of AI in the cloud landscape.

Today, demand for data centers is at an all-time high. What does it take to stay ahead and deliver on client needs?

Jarnagin: Building strong professional relationships is crucial. Our global presence allows us to identify emerging opportunities and risks, which we leverage to provide our clients with strategic insights that help them stay ahead in a rapidly evolving market. This approach, combined with a deep understanding of each client’s business objectives, growth plans and technology requirements, enables us to provide customized services that align with their unique challenges and goals.

Additionally, familiarity with regional laws and government incentives is essential. We often guide clients to site options that offer significant benefits, such as tax breaks and lower power rates, helping them make informed decisions that maximize their success.

READ ALSO: Data Center Labor Shortages Take Center Stage

In what ways is your end-to-end model different?

Jarnagin: What sets us apart is our comprehensive approach to data center development. We collaborate with real estate developers, infrastructure firms, power generation and storage teams, as well as data center operators to enhance cloud capacity. We partner with enterprise companies, hyperscalers and AI/graphical processing units (GPU) infrastructure providers to identify opportunities for expanding cloud capabilities, addressing what’s needed during discovery and building phases, but also considering future requirements.

Speaking of the future, AI is rapidly catching up. How are client demands shifting in relation to this new reality?

Jarnagin: With the rapid growth of AI, we’re seeing a significant increase in demand for data center cloud solutions that support high-performance computing needs. Clients are increasingly seeking solutions that can handle the intense workloads generated by AI applications, and we’re actively adapting our services to meet these evolving requirements, ensuring our clients stay at the forefront of innovation.

This includes integrating advanced cooling solutions specifically designed to address the unique needs of AI and GPU workloads. These new cooling technologies, such as liquid cooling and immersion cooling, are crucial for managing the substantial heat generated by high-performance GPUs, allowing us
to maintain efficiency and reliability in our infrastructure.

How has the data center sector reacted to the high interest rate environment? Are financing deals more difficult to land or is the market somewhat more insulated from other types of real estate?

Jarnagin: The data center sector is somewhat insulated from the broader real estate market due to strong projected growth and sustained customer demand. However, the current environment has prompted investors and financial partners to conduct more rigorous due diligence. They are particularly focused on verifying that utility power is secured and that procurement and construction timelines for
substation builds are realistic and aligned with project demands. Overall, this added scrutiny reflects the unique challenges posed by supply chain constraints and utility power availability.

And power availability remains one of the greatest hurdles when it comes to developing new facilities. How do you tackle this issue with your clients?

Jarnagin: We recognize that power availability is one of the most critical challenges in developing new facilities. To address this, our approach begins with staying at the forefront of technological advancements, ensuring we can offer our clients solutions that enhance both efficiency and sustainability
from the outset. We collaborate closely with our clients during the planning and predevelopment stages, bringing in partnerships that specialize in cutting-edge solutions such as sustainable energy sources, advanced energy storage systems, and even nuclear energy as a viable, low-carbon option for long-term power generation.

Given the significant challenges utilities face today—including increased demand, supply chain constraints and the infrastructure needed to deliver power—we offer alternative power solutions to bridge the gap between utility delivery. These solutions are tailored to regional and infrastructural factors, ensuring they align with the specific needs of the project.

In support and collaboration with local utilities and jurisdictions, we provide a path for multiple power solutions onsite, increasing the capabilities for additional power generation in the long term. This holistic approach includes evaluating whether infrastructure is in place, determining if the utility is open to partnering, assessing the potential for feeding power back to the grid, addressing NIMBY concerns, and ensuring compliance with local regulatory and permitting requirements.

READ ALSO: Data Center Market Trends

Could you elaborate on the types of partnerships you’re seeking?

Jarnagin: We are highly strategic in our approach to partnerships. We align with partners who provide solutions that are not only effective today but are also capable of evolving with the rapidly changing demands of the industry, particularly in areas such as power, cooling, design, construction and deployment. Traditional data center solutions for power and cooling don’t always apply in today’s environment. As cloud capacity demands continue to surge, newer, more innovative solutions are essential.

One notable partnership we can speak on is with Ultrascale Digital Infrastructure, an experienced, cutting-edge technology company dedicated to creating advanced, sustainable and customized data center solutions. Together, we are expanding our clients’ access to a comprehensive suite of services, including site master planning, capital partner management, strategic data center development, cloud capacity sourcing, end-user deployment and immersion cooling solutions.

Are you targeting specific markets when building partnerships? Where do you see demand levels providing the most opportunity for you over the next 12 months?

Jarnagin: We are particularly interested in expanding into the traditional real estate sector, where we see immense potential for data center development, especially in light of the current AI boom. By fostering collaboration between traditional real estate companies and data center experts, we believe we can unlock significant opportunities that drive technological advancement and economic growth. Regions like Northern Virginia and the Pacific Northwest, where demand for data center capacity is surging, present some of the most promising opportunities for us over the next 12 months.

The post How AI Is Pushing Cloud Data Center Providers to Scale Up appeared first on Commercial Property Executive.

It’s the company’s entry into the Texas market, expanding its colocation capabilities across the U.S. The two data centers—HOU1 and HOU2—provide over 500 MW of new potential capacity.

The transaction was funded with equity commitments from Manulife Investment Management (on behalf of Manulife Infrastructure Fund II, Manulife Infrastructure Fund III and its affiliates), Serverfarm’s majority shareholder, and other minority shareholders. CBRE Data Center Capital Markets exclusively advised the seller.

Serverfarm said in a release that the first phase of one campus is preleased to a large customer, and both campuses are attracting intense interest from hyperscalers and other technology companies.

READ ALSO: More Data Centers, Please!

Serverfarm’s HOU1 data center facility has a current capacity of 350,000 square feet and a line-of-sight of 410 MW of customer capacity. The HOU2 data center campus spans nearly half a million square feet in two buildings and has secured customer capacity to scale to 100 MW using existing grid power.

The sites have a combined acreage of 250 acres, and both campuses have on-site substations with unused available capacity. This uniquely positions Serverfarm to serve the Houston metro at an unprecedented scale, the firm said in a release.

Houston is the seventh-largest U.S. metro economy, home to 7.3 million people, and boasts a GDP of over $630 billion. According to Serverfarm, the central location, skilled workforce, energy infrastructure and business-friendly regulations and tax environment make Houston and the broader Texas area leaders in digital and energy transformation.

Vacancy levels reaching all-time lows

Carl Beardsley, US Data Centers Leader, JLL Capital Markets, told Commercial Property Executive: “Existing data center sites with immediate capacity are in high demand due to a combination of vacancy levels reaching an all-time low and power lead times continuing to push out across the country.”

He added that many data center site requirements prioritize timing to procure the power over being in a top five data center market as generative AI deployments are more location agnostic, prioritizing timing to get the power versus being in a certain latency zone.

Bo Bond, Cushman & Wakefield executive managing director, told CPE that interest in large-scale power availability, plentiful land and less strict latency requirements for AI had driven hyperscalers and operators to expand in a host of historically emerging markets.

“Demand for artificial intelligence and cloud data centers surged in the first half of 2024 in both established and peripheral markets, and absorption is poised to surpass last year’s record levels,” Bond said.

This trend will continue to be driven by providers and investors prioritizing power transmission and hyperscaler deployment, he added. “Despite an expanding pipeline of data center development, demand continues to outpace supply, resulting in consistently declining vacancy rates across the board.”

In July, Microsoft announced it would more than double the size of a data center campus in Medina County, Texas, in the San Antonio metro, the San Antonio Business Journal reported based on a filing with the Texas Department of Licensing and Regulation.

The planned single-story, 244,000-square-foot building reportedly will offer space for up to five tenants. According to SABJ, construction is scheduled to begin in April 2026 and has a tentative dollar value of $483 million.

Robert Martinek, director at EisnerAmper, said that although the overall commercial real estate market has struggled since the pandemic, data centers have grown robustly, doubling their market size in the past four years.

“This has been driven by strong demand for IT and increasingly high-density IT systems advances in cloud-based solutions, artificial intelligence and other new applications and technologies,” Martinek said.

He added that despite the North American data center inventory growing by 20 percent over the past year, active markets including Northern Virginia, Chicago, Dallas-Fort Worth and Silicon Valley have all seen significant net absorption increases and vacancy rates falling below 3 percent. According to Martinek, supply shortages and a high demand during this period have caused average asking rates in these markets to surge by 20 percent year-over-year.

“High-performance computing will require rapid innovation in data center design and technology to manage rising power density needs. Rapidly evolving technologies will further drive and sustain this trend in 2025 and beyond,” Martinek said.

Data center hiring is a challenge

Finding the right talent remains a challenge for data center operators, a vital issue amid rapid growth in this sector, according to a new report from JLL.

The firm’s data center report findings indicated that the booming demand showed no sign of slowing down at midyear, as vacancy set a record low of 3 percent, and occupancy has increased at a 30 percent compound annual growth rate since 2020.

The post Serverfarm Acquires Houston Data Centers appeared first on Commercial Property Executive.

The data center campus, already under construction on 292 acres in Red Oak, Texas, marks the third land acquisition by the Dallas-based company in the past year.

The company’s combined expansion across more than 450 acres will provide 5.8 million square feet of data center space and 792 MW of critical IT load across three sites. The other locations are a 95-acre, 120 MW campus in Atlanta acquired in October 2023 and an 85-acre, 192 MW campus in Culpeper, Va., acquired in November 2023.

READ ALSO: Data Center Labor Shortages Take Center Stage

The three new campuses will more than double DataBank’s portfolio. The company had 2.7 million square feet of data centers and 375 MW of power at its locations before the acquisitions. The company stated the expansion will position it to capitalize on AI-generated colocation demand for years to come. DataBank notes the three sites will be ideal locations for its enterprise, large technology, AI and hyperscale public cloud customers, while positioning the company for significant future growth.

Company expansion

Phase 1 of the Red Oak campus will feature four buildings and a 400 MW substation from Oncor that can deliver up to 240 MW of critical IT power with the ability to increase this in Phase 2 for a total of 480 MW across eight buildings. Plans call for the initial phase to be ready for service by the second quarter of 2026.

DataBank stated the facilities built at the Red Oak campus will leverage its Universal Data Hall Design, which will ensure capacity can be quickly deployed to meet the wide-ranging sustainability and performance requirements of all customers including enterprises, hyperscale cloud providers and emerging AI applications that need the highest possible power and cooling density.

DataBank notes Red Oak has become a major submarket in Dallas, attracting the world’s largest cloud and technology providers. DFW9 will be the company’s ninth facility in the Dallas market, where it also has its headquarters.

DataBank completed its third Dallas-area data center, DFW3 in Plano, Texas, in August 2018. That 145,000-square-foot facility has 13.5 MW of critical IT capacity and features more than 72,000 square feet of raised floor space aimed at build-to-suit deployments.

The company currently has more than 65 data centers in more than 27 markets, 20 interconnection hubs and on-ramps to an ecosystem of cloud providers.

DataBank’s expansion across the U.S. has been aided by a $725 million credit facility secured in April. The capital is funding ongoing expansion in existing markets, including campuses in Dallas, Denver, New York, Minneapolis and Salt Lake City. It was supported by a group of 14 digital infrastructure banks, including TD Securities as the administrative agent and joint lead arranger. It came soon after DataBank issued $456 million in secured notes in February. The issuance qualified as a green bond based on the projects being refinanced meeting sustainability criteria for water conservation, carbon emissions reduction and power usage. DataBank’s goal is to be carbon neutral by 2030.

The post DataBank to Build 480 MW Dallas Data Center Campus appeared first on Commercial Property Executive.

The joint venture partners plan a five-building development that will have 300 MW of secured power by April 2027, with the potential to increase to 500 MW.

The site is less than 10 miles from downtown Charlotte and has convenient access to the nearby intersection of I-485 and Highway 49.

Additional power

Given an existing adjacent substation, the site will have access to 15 MW of bridging power by the fourth quarter of 2026. Duke Energy has partnered with the developers to build an additional substation to deliver the incremental 500 MW of power, leveraging Duke’s capability to provide over 50 percent renewable energy, thanks to its nuclear power generation.

Simpson Thacher & Bartlett LLP serves as legal counsel to Town Lane, and Arnold & Porter Kaye Scholer LLP serves as legal counsel to PowerHouse. Eastdil Secured LLC advised on the land sale.

In May, a joint venture between PowerHouse and Harrison Street purchased a 50-acre site in Irving, Texas. Plans call for constructing an almost 1 million-square-foot data center campus that will boast 200 MW of power at full build-out.

It marked the duo’s entrance into the Dallas-Fort Worth market and their sixth data center development.

In May, Town Lane closed its inaugural fund, Town Lane Real Estate Opportunities Fund I, with nearly $1.3 billion in total commitments. The fund was oversubscribed and closed on its investor commitments in the first half of 2024, above its initial $1 billion target.

Town Lane was founded by 19-year Blackstone veteran Tyler Henritze and co-founded by Parker Morse, his sister, who was previously at Sycamore Partners for over a decade.

The post PowerHouse JV Plans 2.5 MSF Data Center in Charlotte appeared first on Commercial Property Executive.

EdgeCore Digital Infrastructure has completed its third round of financing of the year.

The firm secured another $1.9 billion in equity, bringing the total investment obtained this year to more than $4.2 billion. Partners Group—which acquired EdgeCore in 2022—led the oversubscribed capital raise and provided a substantial amount as anchor.

The Denver-based wholesale developer and operator will use the funds to grow its presence in the hyperscale data center market.

EdgeCore’s most recent project is in Culpeper, Va., where it’s working on a 1.4 million-square-foot campus rising on 120 acres. The firm will initially build three facilities, each capable of supporting 72 megawatts.

At full build-out, the campus will be capable of supporting up to 432 megawatts. Rappahannock Electric Cooperative will deliver the power starting in 2028.

READ ALSO: Data Center Labor Shortages Take Center Stage

This new development is taking shape within the recently established Culpeper Technology Zone, a 690-acre site that local authorities have designated mainly for data center projects. Apart from EdgeCore, five other developers are in various stages of commitment to the site, including Cielo Digital Infrastructure, CloudHQ, Copper Ridge, DataBank and Peterson Cos., Data Center Frontier reported.

The site has access to sufficient infrastructure and is close to the Network Access Point of the Capital Region. “Markets such as Culpeper are at the core of our vision, given that they offer the right combination of robust utility power and proximity to Tier 1 infrastructure,” Julie Brewer, executive vice president of finance at EdgeCore, told Commercial Property Executive.

Growing a significant hyperscale portfolio

EdgeCore is doubling down on its commitment to develop hyperscale data centers, which are used for AI and other HPC applications. With its new Culpeper campus, the company is now present in five markets—the other four being Ashburn, Va., Santa Clara, Calif., Mesa, Ariz., and Reno, Nev.

In January, EdgeCore secured $1.9 billion in green financing for its 3.1 million-square-foot campus in Mesa. In March, it closed on another $440 million in debt to fund the expansion of its Santa Clara property.

Last August, the firm broke ground on its first data center project in Reno, set to provide 216 megawatts of IT load by late 2025. The 1.5 million-square-foot campus is within the Tahoe Reno Industrial Center.

Data center development outpaces power delivery

According to a recent CBRE report, data center under-construction activity across primary markets hit a record high in 2024’s first half, up 69 percent since last year to 3.8 gigawatts. As data center developers usually buy electricity in advance through a power purchase agreement, this surge in construction led to longer lead times for such infrastructure. This, in turn, led to delays in completions.

The same source shows that power availability is the top consideration when it comes to site selection. However, this did little to curb investors’ appetite for digital infrastructure—which mostly targeted new developments—as several massive deals closed this year.

For example, funds managed by Blue Owl Capital Inc., Chirisa Technology Parks and PowerHouse Data Centers recently formed a $5 billion joint venture, focused on developing hyperscale AI and HPC data centers for CoreWeave Inc.

Earlier similar investments included the $9.2 billion in equity raised by Vantage Data Centers, as well as STACK Infrastructure’s $1.3 billion financing, both announced in June.

The post EdgeCore Secures $1.9B in Equity appeared first on Commercial Property Executive.

Focused on developing large-scale AI/HPC data centers for CoreWeave Inc., the agreement is intended as the first stage of a partnership with the capacity to deploy up to $5 billion of capital for turnkey data center developments also supporting other hyperscale and enterprise data center customers.

The partners described the venture as “an innovative and flexible capital solution allowing for the rapid development and deployment of new AI/HPC capacity across the U.S.” on a build-to-suit basis.

READ ALSO: Data Center Labor Shortages Take Center Stage

An initial 120 MW of capacity will be delivered for CoreWeave in 2025 and 2026 at Chirisa’s 350-acre campus near Richmond, Va. Further deployments in the pipeline reportedly include both brownfield and greenfield campuses in New Jersey, Pennsylvania, Texas, Kentucky and Nevada.

Newmark served as advisor to the joint venture.

CoreWeave is a provider of cloud-based GPU infrastructure to AI developers. In May, TIME named CoreWeave one of the 100 most influential companies.

Chirisa Technology Parks has data centers in Richmond, Va.; Chicago; Piscataway, N.J.; and Seattle. The company currently offers more than 500,000 square feet of purpose-built data center capacity, with a pipeline exceeding 400 MW under development in the U.S.

PowerHouse Data Centers is the data center division of American Real Estate Partners. It has 30 buildings currently in planning or underway, totaling more than 2.3 GW of power in six major U.S. markets.

AI leads the charge

The surge in data center demand, deals and development is mostly a result of the artificial intelligence boom, as Commercial Property Executive recently reported, based on a CommercialEdge report.

An even more recent report from CBRE found that almost all CRE investors surveyed intended to increase their capital deployments to data centers, both in terms of dollar amounts and as a percentage of total CRE investments.

And a mid-year report on the data center sector from JLL states that even though the U.S. colocation data center market has doubled in size in the past four years, vacancy has hit a record low of 3 percent.

JLL further remarked that AI has driven an estimated 20 percent of new data center demand over the last year, though the company also cautions, “AI holds great potential, but it will take years for the technology to evolve and mature.”

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The firm’s data center report findings for 2024 indicated that the booming demand showed no sign of slowing down at midyear as vacancy set a record low of 3 percent, and occupancy has increased at a 30 percent compound annual growth rate since 2020.

Given that asking rents increased between 13 percent and 37 percent year-over-year, depending on the lease size, “There appears to be no ceiling for how high this data center demand is going to reach,” Andy Cvengros, managing director, co-lead of U.S. Data Center Markets, JLL, said in the report.

Now, the challenge is to find skilled workers to employ. An estimated 10 percent of data center roles at existing facilities are unfilled, more than twice the national average across all industries.

Given the technical nature of data centers, only about 15 percent of applicants meet the minimum job qualifications, and positions can take 60 days or more to fill.

Johnathan Meade, CEO of Meade Engineering, told Commercial Property Executive that “quality” labor is a key ingredient to the success of any company operating in the data center industry.

“Although a challenge, it is a solvable problem for the best companies,” Meade said. “As an industry, it’s our responsibility to create career pathways that appeal to a broad range of candidates. Looking beyond the traditional background and resumes is critical to the long-term success of our industry.”

“It’s also important to focus on the growth and development of talent within our organizations. Hiring is just the beginning. Targeted training programs, the ability to move between departments, and clear career paths make it easier for candidates to understand the opportunity.”

READ ALSO: First-Half Investor Darlings

Lisa Flicker, senior managing partner & head of the Real Estate group at Jackson Lucas, echoed to CPE: “The demand for talent in the data center sector is at an all-time high, yet the supply is struggling to keep pace. The war for talent is driving compensation up, and we’re seeing more unconventional hires, such as bringing in senior leaders from adjacent industries like energy or telecommunications.”

She said the core need is the skill to navigate the complexities of power management and infrastructure development.

“This cross-industry expertise is proving invaluable as data centers grapple with power constraints, fierce competition for top talent, and the rapid pace of technological advancement.”

Data center development is also expanding into rural areas with limited labor pools, presenting a unique set of staffing challenges, according to the report.

Attrition rates, especially among younger workers, also remain an issue; 33 percent of the technical workforce is at or nearing retirement age, and this number is likely to double due to demographic trends, according to the report.

Raising awareness for data center jobs

Matt Landek, managing director and U.S. Data Center Work Dynamics and Project Development and Services Lead at JLL, told CPE that until recently, many individuals were unaware of data centers and their associated career opportunities.

“With attention to data centers growing due to the AI movement, data center careers are becoming more widely known,” he said.

“If we invest the time to educate about data center career paths in school like we do others, we will see others pursue this field immediately coming out of school as we seek to staff the industry longer term,” he added.

According to Landek, employers must provide positive employee experiences and implement new approaches to solving staffing challenges while navigating fierce competition for talent and employee burnout.

READ ALSO: How to Become a Leading Data Center Market

“At the same time, the industry needs to expand the labor pool through secondary education exposure, technical development programs and outreach to underrepresented population segments,” Landek also told CPE.

He said firms should develop training programs to convert traditional technicians from other asset classes.

“Given data centers is a growing area with significant career and compensation opportunities, JLL and other organizations can look to hire individuals with foundational solid skill sets and abilities to overcome learning curves quickly from different asset classes, such as hospitals, retail, Class A properties and more.”

He suggested putting them through a defined training program that fills in the gaps between their existing skills and those needed to operate in a data center.

Add amenities and fringe benefits

Additionally, enhancing the employee experience by offering high-quality amenities and fringe benefits is necessary to attract and retain workers, as the culture of work changes and employees expect their employers to provide for them as whole people and not just employees.

“This not only includes a competitive wage, as all employees expect but also providing things that support their physical well-being, like healthy meals or meal vouchers and access to fitness centers, for example.”

Landek said partnering with trade schools and veteran employment agencies will be critical to keeping up with the demand for talent.

“There are not currently enough qualified people to fill the number of jobs open—and jobs that continue to open up—and trade schools and veteran organizations provide opportunities to recruit employees with transferrable skills and put them through the training programs to upskill,” he said.

“Building a community of practice for shared learning, including investing in continuing education and leadership development, is also necessary to keep up with changes in data center processes as technology evolves,” Landek added.

The post Data Center Labor Shortages Take Center Stage: JLL appeared first on Commercial Property Executive.

That isn’t the largest share of deals in the period—multifamily still has that distinction, followed by industrial—but data centers’ share saw the largest growth from 2023, when they represented only 4 percent, and the two years before that, when deals in the sector were nil.

That finding dovetails with a DLA Piper survey from earlier this year, which found that data centers were the most attractive asset class, up more than 20 percentage points from the prior year.

Moreover, the report this spring said that data centers were an area of growth, and DLA Piper now says that it is clearly seeing this play out in its practice, with the company’s data center team handling an increasing amount of data center acquisitions and financing.

For the new report, DLA Piper surveyed over 850 acquisition and disposition agreements and over 400 property management agreements.

READ ALSO: More Data Centers, Please!

Buying and selling wasn’t the only elevated metric for data centers during the first half of 2024, the report noted, finding an increase in the percentage of data center (and industrial) properties in which the project’s construction fee was 5 percent or more. Some 60 percent of such deals had a fee of 5 percent or more, while 40 percent were in the 3 percent to 4 percent range.

Other findings

The report found that office deals, still far down from before the pandemic, actually gained a little ground in the first half of 2024, coming in at 9 percent, compared with 7 percent in 2023. In 2019, office represented fully a quarter (25 percent) of acquisitions and dispositions, the DLA Piper report found.

Retail, also 25 percent of acquisitions and dispositions in 2019, but crashing down in 2020, saw a small downtick between 2023 and ’24, from 9 percent to 8 percent. Industrial has been fairly consistent in terms of acquisitions and dispositions in recent years, DLA Piper explained: 20 percent in 2024, the same as in 2022 and 2020, and only a little down from 21 percent in 2023.

Longer representation and warranty survival periods in commercial real estate deals was another trend that the report found.

A survival period is the time limit during which claims may be brought for breaches of reps and warranties, with a 270-day survival period appearing in 45 percent of transactions and a 365-day or longer survival period appearing in 21 percent, according to the report. Shorter survival periods, especially those of 180 days, continued to decline, down in frequency from 33 percent to 29 percent.

The post First-Half Investor Darlings appeared first on Commercial Property Executive.

Edged Energy, a subsidiary of infrastructure giant Endeavour, has opened its first North American data center, near downtown Atlanta. The facility is the first of three data centers planned for the site, which will eventually provide 168 MW of capacity.

Dubbed Edged Atlanta, the campus was designed for AI workloads. It uses waterless cooling, which will save an estimated 664 million gallons of water annually compared with a similar data center using conventional water cooling technology.

The first building of the Atlanta campus, measuring 210,000 square feet, provides 27 MW of capacity. Its modular system supports densities of up to 70 kW per rack with air cooling and 200 kW per rack with plug-and-play liquid cooling integration. The second and third data centers at the site, which are still under construction, will have 100 MW and 41 MW of capacity, respectively.

READ ALSO: More Data Centers, Please!

The campus is on 80 acres at 1800 Thomas St. NW, on part of the former site of a railroad yard that has been unused for many years. Downtown Atlanta is some 5 miles away.

Edged Energy is at work on other data center campuses in the U.S., including facilities in Chicago, Kansas City, Phoenix, Dallas and Columbus, Ohio. The company is also developing or operating data center projects in Europe.

A growing data center market

Atlanta is a growing data center market, with its facilities able to leverage the region’s labor force, power supply and fiber connectivity. More than 1.2 GW of capacity was under construction during the first half of 2024, far outpacing any half-year period on record, according to a CBRE report.

Demand for Atlanta data center capacity has been strong enough in recent years to shrink the market’s vacancy rate. As recently as 2020, vacancies stood at about 15 percent; as of 2024, the rate is roughly half that.

Nationwide, Northern Virginia remains the largest U.S. data center market by far, with 46.5 percent of all the capacity of the eight major markets. Atlanta has grown into one of those markets, and now has 5.5 percent of their total capacity.

The post Edged Wraps Up Atlanta Data Center appeared first on Commercial Property Executive.

Novva Data Centers plans to build a 300 MW campus on 160 acres in Mesa, Ariz. The company is slated to invest more than $3 billion, in two phases, over the next decade. The campus is Novva’s sixth and its first entry into Arizona.

Plans call for a first, 96 MW first phase, scheduled to deliver in late 2026. On completion, the campus will encompass five data halls, an office building and warehouse with a total footprint of 1.3 million square, off the 202 loop at Ellsworth and Warner roads.

The facility’s design will include a water-free air-cooling system, which Novva estimates will conserve up to 650 million gallons of potable water each year and avoid the discharge of about 350 million gallons of wastewater.

READ ALSO: More Data Centers, Please!

The campus reportedly will also feature:

• High-density deployments designed for direct-to-chip cooling applications, with liquid (non-water) cooling and air-cooling systems.
• Backup diesel generators designed to operate using second-generation biofuel and hydrotreated vegetable oil to reduce emissions.
• Heat-reducing asphalt sealant and ultra-reflective coatings to reflect more sunlight and reduce the heat island effect.
• Robot and drone surveillance programmed specifically for data center security.

The data halls will be oriented east-west to minimize the effects of solar exposure. Xeriscaping will emphasize native plants and downward lighting to minimize light pollution.

The campus will offer multiple outdoor gathering spaces and trails, for both employees and neighboring residents. In recognition of the pre-Columbian indigenous Hohokam people, the site will feature architectural details such as rammed-earth materials.

Phoenix, data center hot spot

Mesa will be Novva’s sixth location and joins campuses in West Jordan, Utah; Colorado Springs, Colorado; Reno, Nevada; Las Vegas; and San Francisco. This Mesa campus by Novva is one more part of Phoenix’s growth into what could become one of the world’s largest data center markets.

Metro Phoenix saw 148 MW of net data center absorption in the first half of this year and has 334 MW under construction, both figures in the context of a current inventory totaling 511 MW, according to a brand-new report from CBRE.

Overall vacancy was just 3.3 percent, CBRE reported, and lease renewal rents have increased by up to 20 percent.

The post Phoenix Lands Latest Multibillion-Dollar Data Center appeared first on Commercial Property Executive.

Denver-based developer Tract advanced the plan behind what would be one of the most extensive such facilities in the U.S. at full buildout. The development will also include a mix of industrial uses across more than 2,000 acres in the Buckeye Tech Corridor.

Earlier this month, the Buckeye City Council unanimously approved a new development agreement with Tract. The developer would receive up to $50 million in public infrastructure costs after generating $60 million in revenue for the city, the Phoenix Business Journal reported.

Metro Phoenix currently ranks fourth among the largest U.S. data center markets. It is where “some of the deepest pipelines remain … with hyperscalers doubling down on cloud regions and laying the groundwork for AI integration with cloud services,” according to a report from Cushman & Wakefield.

READ ALSO: AI Is Changing the Game for Data Centers

Upon completion, this project will position Phoenix as the world’s second-largest data center market, following Northern Virginia and surpassing Atlanta, said Howard Berry, principal of the national data center solutions division at Avison Young.

Graham Williams, CIO of Tract, told CPE that all the hyperscalers have data center campuses in the greater Phoenix market, and there is a robust lineup of wholesale providers, including Stack, QTS, Vantage, CyrusOne, NTT, Compass and others. However, data center development requires careful planning for land, power and zoning in those precise locations.

“Buckeye’s proactive and forward-thinking approach means that it is now in an advantaged position to attract thousands of good paying permanent tech jobs, many thousand skilled construction jobs, and a meaningful tax base to help support the expected continued residential growth,” Williams noted.

Gigawatt data center campuses were unthinkable a decade ago, according to Andrew Batson, JLL head of data center research for the Americas. There are about a dozen gigawatt projects across the U.S. in various forms of development. Phoenix is already in the top 5 U.S. data center markets in terms of current size, growth since 2020, capacity under construction and planned capacity pipeline.

“The addition of a gigawatt development in Phoenix would further establish the market as a national leader, especially as a top destination in the Southwest,” Batson said, adding that vacancy in the metro is among the lowest in the U.S. at 2 percent, giving hyperscalers the confidence to proceed with additional development.

Operating a data center in Phoenix is also among the most affordable in the U.S., Batson reasoned. “Both data center rents and power costs are in the bottom quartile of the nation’s markets. From the occupier side, this is driving demand. Proximity to a large and growing Southwest population is also a factor.”

Finding reasonably priced land at scale

Jacob Albers, head of the Alternatives Insights think tank with Cushman & Wakefield, told CPE that, since California data center development is facing a challenging mix of limited land availability, high land prices and high power prices, adjacent states have picked up the mantle. Phoenix, Portland, Ore., Las Vegas, and Reno, Nev., have also seen significant data center developments rise over the past five years.

READ ALSO: More Data Centers, Please!

“However, Phoenix has pulled far and away ahead of these markets in both live capacity (one of only a handful of gigawatt-plus markets) and development (with more than 3.5 GW under construction or planned),” he said. “The demand story for Phoenix has also remained strong, with … absorption exceeding 600 MW last year and on track to be similar in 2024.”

The U.S. has seen the size of data center campuses steadily grow around the country, along with an expanding trend of master-planned campuses that can be 1 to multiple gigawatts in size, according to Albers.

“This trend has begun to expand around the country where land can be purchased at scale for reasonable prices,” Albers continued. “(In) Phoenix—and Arizona at large—(it) makes logical sense for these mega campuses to grow, as a result of plentiful land, significant fiber connectivity, a substantial labor pool and low natural disaster risk, among many other factors.”

“The Buckeye project adds another submarket within Phoenix that supports the growth of cloud computing and artificial intelligence,” Johnathan Meade, CEO of Phoenix-based Meade Engineering, told CPE. “Hyperscale data center operators are rapidly expanding their physical footprint and Buckeye is now on the global radar of regions that can support the unique needs of these developments.”

Giving greater scrutiny to energy consumption

Phoenix is also among the growing number of data center hubs facing power generation constraints. Power issues notwithstanding, the region’s data center vacancy barely broke above the 2 percent mark.

Power—and water—consumption is now a primary focus for data centers of all sizes, particularly mega developments, which receive extra community scrutiny, Batson said.

“Counterintuitively, gigawatt developments can help ease the short- to medium-term strain on the power grid compared to the patchwork of uncoordinated development typically taking place in markets due to certainty and phasing,” he continued.

READ ALSO: Are Microgrids the Answer to CRE’s Power Struggle?

Additionally, the Southwest is booming with solar, battery storage and wind developments due to rising demand and the renewable incentives of the Inflation Reduction Act, Albers said.

“The West energy region (that includes Phoenix) has over 700 gigawatts in queue for connection to the grid. While most of this upcoming capacity is several years away, savvy developers are working early in their timetables to begin contracting with utility providers and energy developers in their projects’ planning and construction phases,” he concluded.

Williams said Tract will work with APS to secure transmission infrastructure and generation capacity, including sourcing new net renewable projects at the Buckeye campus.

Considering various cooling solutions

Data center water usage varies widely based on operator, use case and design. Current developments in the Phoenix area have already taken precautions to be conscious of water usage because of requests from state and local governments and water utilities.

“Thankfully, technology has been quickly evolving to meet the challenge,” Batson mentioned. “Most high-powered data centers currently under construction deploy a closed-loop cooling system that does not require a significant continuous flow of fresh water to cool the facility.”

He added that this technology requires a small fraction of the water used in prior generation data centers. Additional cooling methods such as direct-to-chip cooling and rear-door heat exchanges are also being deployed, improving energy efficiency.

Based on Meade Engineering’s experience working on large data center campuses, Meade expects that Tract’s collaboration with Arizona Public Service will lead to the construction of dedicated substations to meet the demands of hyperscale data centers.

READ ALSO: Adaptive Reuse Is a Growth Lever for Data Centers

“Water usage is a point of discussion in the data center world, especially as liquid cooling solutions continue to be adopted and explored,” Meade said. “We, as engineers, are responsible for providing excellent solutions that address water usage concerns while balancing the end user’s needs and requirements.”

Williams mentioned the data center park will use less than half of the water that would have been used by a multifamily residential development on the same land.

Aaron Tartakovsky, co-founder & CEO of Epic Cleantec, said a circular model of water—where it is continuously restored—is an alternative to the traditional linear approach.

“By implementing advanced water reuse systems, water can be treated and recycled as wastewater on-site, making it available for various beneficial uses, including data center cooling,” Tartakovsky mentioned. He added that the use of alternative water sources, such as reclaimed water, further decreases dependency on limited supplies.

“Strategically co-locating data centers near municipal wastewater treatment facilities allows them to utilize highly purified recycled water generated by local communities, ensuring a reliable and sustainable water source that supports data center operations without depleting the community’s supply,” Tartakovsky said.

Data centers position themselves as leaders in environmental stewardship when they address water scarcity appropriately, he continued.

“Given their rapid expansion and critical role in the digital economy, data centers must lead by example. By rethinking their approach to wastewater, data centers can foster sustainable development while coexisting harmoniously with the communities they rely on and share vital water resources with,” Tartakovsky concluded.

The post How to Become a Leading Data Center Market, the Phoenix Way appeared first on Commercial Property Executive.

Following its strong launch into the U.S. data center market earlier this year, Edged Energy is well underway with the expansion of that initial footprint. The firm is developing a 24 MW data center in New Albany, Ohio.

Edged Columbus is rising on a 15-acre parcel at 6525 New Albany Road E., less than 20 minutes from downtown Columbus, Ohio. Development work started earlier this year and the facility is expected to open in July 2025.

The New Albany City Council approved the $250 million project in November. The council also granted a 15-year, 100 percent real property tax abatement.

Edged Columbus, up close

The 210,000-square-foot data center will feature ultra-efficient energy systems and waterless cooling technology designed to support the demands of generative AI and advanced computing.

The ThermalWorks waterless cooling system will drastically cut energy usage and Edged Columbus is expected to save nearly 95 million gallons of water annually, compared to conventional data centers, helping to conserve water in a state where several areas are already in severe drought. The system supports densities of up to 70 kW per rack with air cooling and 200 kW per rack with plug-and-play liquid cooling integration.

Edged Energy burst onto the U.S. data center market earlier this year with plans to build four campuses, totaling nine buildings, in the Atlanta, Chicago, Phoenix and Kansas City metro areas. At the time, Edged announced that it intended to break ground on several additional sites in major U.S. urban markets in the following months, but did not specify where, till now.

Silicon Heartland

A U.S. data center overview by Newmark earlier this year highlighted Columbus—aka the Silicon Heartland—as an emerging data center market. The region’s advantages include ample availability of land, relatively low-cost power and various tax incentives.

Earlier this year, 5C Data Centers started the expansion of CMH01, its 200 MW data center in Columbus. The firm acquired a 66,000-square-foot live facility that will grow to 320,000 square feet in the next development phase. The initial 100 MW are scheduled for completion in the first quarter of next year.

The post Edged Data Centers Continues US Drive With $250M Project appeared first on Commercial Property Executive.

JK Land Holdings has purchased a 25.3-acre asset in Ashburn, Va., where it intends to build a 360,000-square-foot data center. Finmarc Management sold the property for $60 million. KLNB and CBRE represented the buyer and the seller, respectively.

Finmarc had purchased the asset in 2019 for $26.1 million, funding its acquisition with a $20.1 million loan issued by City National Bank of West Virginia, CommercialEdge data shows.

The property currently encompasses a three-story, 110,000-square-foot office building and a nearly 80,000-square-foot R&D/warehouse structure. Telos Corp. is the sole tenant, having occupied the entire property since 1988. According to its most recent annual report, the lease will expire in 2029.

READ ALSO: How AI is Boosting the Data Center Market

The land is fully entitled for data center use with approval from Loudoun County. According to the filed plans, the facility will include 20 generators and a dedicated substation. However, JK Land Holdings Chairman Chuck Kuhn claimed that the company will make a final decision once Telos exits the lease, as reported by Washington Business Journal.

Located at 19886 Ashburn Road in Loudoun County, the site is some 35 miles from downtown Washington, D.C. TA Realty’s upcoming 1.9 million-square-foot data center, which the firm fully leased to a global cloud service provider last year, will operate less than 6 miles away.

KLNB Commercial Real Estate Broker and Principal Ryan Goeller represented JK Land Holdings while CBRE Vice Chairman Rob Faktorow and First Vice President Josh Greenberg alongside Vice President Anna Faktorow led the negotiations on behalf of Finmarc.

Northern Virginia continues to dominate U.S. data center sector

Keeping up with increasing data center demand, Northern Virginia’s inventory grew 18 percent year-over-year as of March 2024, according to a CBRE report including statistics for the first four U.S. primary markets: Northern Virginia, Dallas-Fort Worth, Chicago and Silicon Valley. The region’s vacancy rate dropped 90 basis points to 0.9 percent in March, the lowest in the nation.

The report goes on to show Northern Virginia’s average monthly asking rates for a 250- to 500-kW requirement grew by 41.6 percent year-over-year at the end of 2024’s first quarter. The region outperformed the average of those four markets, which grew by 20 percent during the same interval.

New rules for Loudoun County data center development

As power remains undersupplied, an issue amplified by a scarcity of developable land, a new local zoning ordinance dampened Virginia’s supply pipeline further. In December 2023, Loudoun County adopted a zoning ordinance that includes changes to the approval process.

This new ordinance aims to reduce impact upon residential properties that neighbor data centers by implementing standards for soundproofing roof-tops, noise studies, limited generator testing hours, among others.

The post JK Land Holdings Plans Northern Virginia Data Center appeared first on Commercial Property Executive.

A few months after withdrawing its application for a $14 billion data center campus in Phoenix, Denver-based Tract returned to the metro with an ever larger project, according to the Phoenix Business Journal.

The developer plans a 1,700-acre data center campus in Phoenix’s West Valley, just south of Interstate 10.

City officials in Buckeye, Ariz., will vote today on the rezoning of a former master plan for a residential community called Cipriani. Approval would permit about 1,700 acres of phased data center development and “a mix of industrial uses” across a total of more than 2,000 acres in the Buckeye Tech Corridor.

READ ALSO: More Data Centers, Please!

As part of the deal, Tract would chip in $18.5 million for a future I-10 interchange at Johnson Road, a temporary public safety facility and other improvements.

Tract did not respond to Commercial Property Executive’s request for information. The firm’s initial project was for a data center campus to rise on 1,000 acres and span 5.6 million square feet across 30 buildings.

The limits of power

Tract is no stranger to sprawling data center campuses in dry climates. In February, the company announced that it had acquired an additional 517 acres within the Tahoe-Reno Industrial Center in Storey County, Nev. The company had previously acquired more than 2,200 acres inside TRIC, in two parcels.

Metro Phoenix ranks number four among the largest U.S. data center markets, those where “some of the deepest pipelines remain … with hyperscalers doubling down on cloud regions and laying the groundwork for AI integration with cloud services,” according to a report from Cushman & Wakefield.

Unfortunately, Phoenix is also among the growing number of data center hubs that are facing power generation constraint. Power issues notwithstanding, the region’s data center vacancy barely broke above the 2 percent mark.

The post Tract Eyes Massive Data Center Campus Near Phoenix appeared first on Commercial Property Executive.

Microsoft will more than double the size of a data center campus in Medina County, Texas, in the San Antonio metro, the San Antonio Business Journal reported based on a filing with the Texas Department of Licensing and Regulation.

The planned single-story, 244,000-square-foot building reportedly will offer space for up to five tenants. Construction is planned to begin in April 2026 with a tentative dollar value of $483 million, according to SABJ.

WSP USA, of New York, is designing the space. Construction is expected to finish in the first quarter of 2028.

READ ALSO: Are Microgrids the Answer to CRE’s Power Struggle?

Once underway, this will be the third data center Microsoft is developing at a site near Castroville, Texas. The first two buildings are expected to deliver later this quarter.

Other companies too are part of a data center boom in the metro, including CyrusOne, Vantage Data Centers, Amazon and CloudHQ.

Just last month, Stream Data Centers broke ground on its third project in the San Antonio region, a campus with up to five AI-ready buildings totaling 1.5 million square feet and supporting up to 200 MW of capacity. The first 300,000-square-foot building is scheduled to deliver in the second quarter of 2025.

Massive Midwest commitment

Unsurprisingly, Microsoft has been a steady and major player in data center development. One of its highest-profile projects has been a $1 billion, 215-acre data center campus in Mount Pleasant, Racine County, Wis., which broke ground in August 2023. Lead contractor Walsh Construction was scheduled to begin foundation work on the development’s four buildings that fall, with project completion expected in 2026.

This past May, however, Microsoft announced plans to expand the project with perhaps $2 billion or more of additional cloud and AI infrastructure capacity. Other aspects of the expansion involved partnerships with Gateway Technical College and the University of Wisconsin–Milwaukee and a partnership with National Grid build a new 250 MW solar project in the region.

The post Microsoft Boosts Data Center Capacity in San Antonio Region appeared first on Commercial Property Executive.

Crusoe Energy Systems LLC is developing a 200 MW data center at the Lancium Clean Campus outside Abilene, Texas. The facility is expected to be energized in 2025.

This is the first phase of Crusoe’s development at the Lancium campus, which will eventually expand to enable AI workloads across 1.2 GW of capacity. That reportedly would make the site one of the world’s largest data center campuses once fully operational.

A Lancium spokesperson confirmed to Commercial Property Executive that financials on the development are not being disclosed. The project is being described only as “a multibillion-dollar investment.”

READ ALSO: More Data Centers, Please!

The purpose-built data center will include high-density data halls specially designed for AI workloads; plans also call for the use of local renewable energy. The facilities will feature direct-to-chip liquid cooling systems or rear-door heat exchangers, but air cooling could also be included.

At completion, each unit will be able to operate up to 100,000 GPUs on a single integrated network grid.

From bitcoin mining to AI computing

The Abilene Clean Campus totals 1,100 acres and currently has 200 MW of data center power capacity, with a total of 1,000 MW to be energized by 2025.

The property initially was set to be a bitcoin farm to operate on 800 acres located around Spinks Road and Summerhill Road. In 2021, the city of Abilene partnered with Lancium in what was, at the time, the largest project in Taylor County’s history.

Lancium’s projected investment in real property improvements totaled approximately $2.4 billion, according to Data Center Dynamics. The firm broke ground on the campus at the end of 2022.

As for Crusoe, the firm started to switch its main focus from mining cryptocurrencies to developing data center buildings late last year, DCD also reported. Established in 2018, the company initially delivered containerized data centers to oil wells in the U.S. and later extended its services to HPC and AI through its Crusoe Cloud division.

Power enough?

Despite the well-publicized travails of Texas public utilities, the state remains a hub of data center construction.

Just weeks ago, Stream Data Centers broke ground on its third project in metro San Antonio, a five-building, 1.5 million-square-foot, 200 MW development. The initial building is scheduled to come online in the second quarter of 2025.

And in May, a joint venture of PowerHouse and Harrison Street acquired a 50-acre site in Irving, Texas, where the companies plan to build an almost 1 million-square-foot, 200 MW data center campus.

The post Crusoe Builds AI Data Center in North Texas appeared first on Commercial Property Executive.

Citing the need to support increasing demand for scalable data center power and capacity in the Southeast, TA Realty and EdgeConneX are teaming up to develop a 324 MW hyperscale data center near Atlanta. Construction is set to start later this year with the first phase expected to come online by 2026.

Microsoft will be the end user of the future campus, according to Atlanta Business Chronicle and other media sources. The development will eventually measure about 2.1 million square feet and cost roughly $1.8 billion.

In addition to the first 612,000-square-foot building to be delivered in Phase 1, two more facilities of the same size are to be constructed in three phases, with the entire project set for completion by 2029, according to Data Center Frontier.

READ ALSO: Prologis, Blackstone Double Down on Data Centers, but Hurdles Remain

Last month, the Development Authority of Fulton County approved $75 million in incentives over a 10-year period for EdgeConneX, ABC reported. The project is expected to create about 50 full-time jobs and 400 to 600 temporary construction jobs. The 10-year economic impact is estimated to be approximately $2.9 billion with about $200 million in tax revenues over the same period.

The joint venture partners declined to give the address of the site. However, ABC reported an affiliate of EdgeConneX acquired nearly 63 acres of woodlands in Union City, Ga., for $318.5 million from TA Realty.

A lucrative partnership

TA Realty had initially acquired the site, made out of several parcels, in 2023. The Boston-based provider of real estate investment management solutions will now manage power procurement and also secure all necessary utilities, permits and approvals.

In November, TA Realty leased its entire 1.9 million-square-foot, five-building data center campus in Loudoun County, Va., to a global cloud services provider. The build-to-suit deal marked the formation of a new group at TA Realty dedicated to global infrastructure, which was officially unveiled in January.

EdgeConneX, a Herndon, Va.,-based global provider of data center solutions, will design, build and operate the facility. The company, backed by EQT Infrastructure, also has global headquarters in Singapore and Amsterdam and operates more than 80 data centers across North America, Europe, Asia Pacific and South America.

Growing data center demand

The Atlanta-area development supports the growing demand for low latency, high-performance computing driven by advancements in AI, cloud services and other emerging technologies. The need for resilient and scalable digital infrastructure continues to rise as businesses increasingly rely on these technologies.

The Microsoft data center campus is expected to be one of the largest in the South. The land sales price was described as stunning in the ABC report and another sign of the growing importance of Georgia and the Greater Atlanta metro in data center development.

A recent CBRE survey of investors found Atlanta is the third most popular market for data center investment in the U. S. behind North Virginia and Dallas-Fort Worth.

The post TA Realty, EdgeConneX to Build Microsoft Data Center Campus appeared first on Commercial Property Executive.

In CBRE’s Investment Intentions Survey, 97 percent of respondents, many of whom are the world’s largest institutional real estate investors, said they plan to increase capital deployment to data centers. The survey authors noted that data center transaction volume for all of North American totaled $4.8 billion in 2023, a 29 percent YOY increase.

Investment in data centers is expected to increase significantly over the next few years. Thirty-eight percent of respondents had less than five percent of their capital assets invested in data centers, but 82 percent of them expect to increase investment in this sector over the next five years.

READ ALSO: Are Microgrids the Answer to CRE’s Power Struggle?

Currently, investor appetite is strongest in the high-yield, opportunistic and value-add real estate segments with solid market fundamentals, but 80 percent of CBRE respondents indicated a preference for this asset type, up from 65 percent in a 2023 survey. High inflation and interest rates have reduced investor interest in core assets, down from 50 percent in 2021 to 30 percent this year. Similarly, core-plus asset interest among respondents dropped from 58 percent in 2021 to 34 percent in 2024, with investor interest broadly shifting to turnkey offerings from powered shell for the second consecutive year. 

Looking forward, 31 percent of respondents believe the best data center opportunities over the next two years will be in build-to-suits for the hyperscale data center market—no change from last year’s survey but a significant increase over 2022 and 2021, when 22 percent and 17 percent, respectively, expressed this preference.  

The past few real estate cycles demonstrated that demand for data centers is nearly recession-proof, and many applications, particularly those with high-credit tenants, such as large enterprise private deployments, are typically sticky,” said Dallas-based Todd Smith, who leads the Technology Properties Group at Transwestern. “There is confidence that despite any ebbs and flows on the demand in this area that may occur, demand and subsequent investment will be buoyed by continued macro needs for ever- increasing data,” he added.

“The scale of the capital required to meet demand is allowing both existing and new investors to support attractive opportunities, which are especially appealing given data centers’ positioning as the backbone of the broader AI-driven digital revolution that is creating long-term, secular tailwinds,” added New York-based Brent Mayo, Newmark’s executive managing director of Data Center and Digital Infrastructure Capital Markets.

He noted that building costs will continue rise, with new facilities designed to support larger and denser workloads with more challenging cooling requirements and infrastructure needs. “Deeper pools of capital will need to be formed to support the industry,” he added, noting the scale of development opportunities and sizing of in-place, stabilized portfolios will require an unprecedented amount of capital to support existing operators, developers, and end-users.

Fabulous fundamentals

There’s good reason for the data center fever. Demand for data center capacity is growing exponentially, outpacing supply due to increases in remote and hybrid work, cloud computing, artificial intelligence workloads, and overall use of digital devices. Based on current demand, demand for data center capacity globally is forecast at 23 percent CAGR according to JLL (see below).

Commercial real estate funds with data centers among their targets have raised $48 billion over the last three years, and major mergers and acquisition and take-private activity in this space totaled almost $75 billion over the same period, with much of this investment coming from private-equity sources or REITs, according to San Francisco-based Jacob Albers, head of Alternative Insights at Cushman & Wakefield..

This alternative real estate sector, a blend of real estate, technology and infrastructure, has experienced surging demand and record absorption, producing strong development yields and overall returns. Overall annual returns for data center REITS in 2023, for example, increased a whopping 30.08 percent, according to a NAREIT report.

“The high performance of major tech companies behind cloud service, social media and now AI models, and their requirements for larger computing capacity is the key driver for investor activity in the data center space,” Albers said. “Annual cloud revenues have grown by 66 percent since 2020.”

Rising demand and high absorption translated to significant YOY rent growth across the board in Q1 2024, reported CBRE. Five primary markets, however, experienced extraordinary rent growth, with Silicon Valley rents surging 54 percent to $170-$200 kW/month); Northern Virginia 47.5 percent to $135-$160 kW/month; Chicago, 47 percent to $125-$140 kW/month; Dallas-Fort Worth, 29 percent to $125-$135 kW/month; and Phoenix, 20 percent to $130-$170 kW/month. 

Come one, come all

Mayo predicted, however, that capital availability in the near-term will tighten given how quickly demand has increased and development has surged. But capital flows to data centers are expected to normalize over time as demand patterns become more predictable.

The top commercial real estate investors in this space, according to Smith, are Blackstone, GI Partners, Digital Bridge, The Carlyle Group, KKR, EQT, Berkshire Partners, and Stonepeak. But Denver-based Gordon Dolven, research director for CBRE Americas Data Centers, noted that Big Tech users, such as Microsoft, Google, Oracle, Amazon, and Meta, are increasingly developing their own data centers.

A large portion of capital entering the sector involves major investors that are acquiring or partnering with operators to expand development pipelines, while a number smaller-scale investors entering this space are acquiring land sites and taking pre-development steps of securing power, entitlements, utilities, and other site preparation before selling to data center developers, Albers said.

CBRE reported that in midyear 2023, U.S data center development jumped 26 percent YOY increase, to 5,174.1 megawatts (one MW is equal to one million watts), and a record 3,077.8 MWs was under construction. In 2024, however, construction activity in primary markets alone is expected to reach a new all-time high of more than 2,500 MWs.

Preleasing activity in primary markets is accelerating new construction, as 2,553.1 MWs or 83 percent of the new capacity under construction is already leased. Top capacity users continue to be cloud service providers, but AI is driving up demand significantly, especially in primary markets where the overall vacancy rate remains near a record low of 3.7 percent. And with few relocation options, the report noted that most tenants are renewing existing leases rather than seeking new facilities.

Northern Virginia, the largest data-center market nationally, remains preeminent for capacity and development, but other major markets continue to see substantial pipeline growth, with multiple markets experiencing double or triple the pipeline capacity of just a couple years ago, Albers noted.

Smaller markets are experiencing unprecedented growth, driven by less latency-sensitive workloads, the availability of power at scale, and economic incentives that can materially impact the cost of data center development and operations, noted Mayo.   

“Secondary markets, such as Columbus, Kansas City, Salt Lake City, Reno and Charlotte, have witnessed major campus announcements, with more rural large-scale development rising across U.S. states, such as Indiana, Mississippi, Alabama and New Mexico,” added Albers.

According to CoreSite, proximity to a corporate headquarters or concentrations of customers or partners, along with connectivity options, latency requirements, financial incentives, power cost and availability, environmental hazards and the business ecosystem within the region that provides the data center industry infrastructure and interconnection solutions, are driving new data center development. This report listed the 10 largest data center markets, in order of MW capacity: Northern Virginia, Dallas-Fort Worth, Silicon Valley, Los Angeles, the New York Tri-State area, Chicago, Washington, D.C., Atlanta, Miami and Phoenix.

The power of data

Data centers require intensive energy capacity, which is spurring tremendous growth in development and investment in infrastructure, too. Mayo contended that power availability is the biggest challenge the industry will face in the coming years. Conservatively speaking, he suggested that data center energy demand will require at least 35-45 GWs of additional electricity by 2030.

New chips used in servers today require exponentially more power than 10 years ago, Dolven said, and AI center demand, which requires about 10 times as much power as other computing workloads, is adding undo stress to both power generation and grid systems.

“Load growth, for lack of a better term, will have to increase,” Dolven continued, noting that the transmission-distribution network is the biggest problem data center developers and operators are facing. “The grid is mission critical, as it is the new railroad or 21st Century plumbing that enables all of this information that we’re generating and receiving.”

Albers noted that data center development is following where large-scale power generation—hundreds of megawatts and ideally more than a gigawatt—will be available within the next few years. “In some cases,” he added, “development of power generation in the form of solar or other renewable micro-grids adjacent to a data center have been considered.”

As the industry continues to embrace sustainability, these assets present significant challenges to ensure resiliency and tie into existing and new energy infrastructure development to sustain growth, stated a midyear 2024 U.S. Real Estate Deals report from PwC. It noted that increasing energy demand by digital-economy properties, coupled with a broad push to transition to clean energy resources, presents significant growth opportunities for real estate and infrastructure investment

Dolven emphasized that data center growth depends on expanding utility infrastructure, as the current grid isn’t designed to deliver massive amounts of electricity to small parcels of 10-50 acres. “This need is generating a willingness among developers to fund or assist in construction of substations on the parcels where they’re building data centers, rather than wait in line for the utility to build a substation for them,” he continued, noting that this also speeds up connectivity.

In addition, Dolven said that investors are increasing capital investment to colocation of renewable energy facilities and data centers. “The dream goal is for data centers to be fully electrified by an adjacent renewable energy source,” he added, noting that the complication is energy production with wind and solar are unreliable or impossible 24 hours a day. 

“The global colocation market is estimated at approximately $85 billion in 2024 and is expected to grow to over $120 billion in three years,” said Albers.

The post More Data Centers, Please! appeared first on Commercial Property Executive.

CBRE Investment Management has received local governmental rezoning and approval for the expansion of its data center in Chandler, Ariz., the Phoenix Business Journal reported.

Under the plan approved by the Chandler city council, the facility located at 2500 W. Frye Road in the East Valley of metro Phoenix will be expanded by 243,000 square feet. Its current size is roughly 150,000 square feet.

CBRE IM could not be reached for further information.

Interestingly, the building currently on the 16.4-acre site came online in 1988 and was used as an office building by Bank of America; its conversion into a data center occurred in 2008. CBRE Global Investors acquired it in 2019 for $72.8 million, according to CommercialEdge information.

READ ALSO: Prologis, Blackstone Double Down on Data Centers, but Hurdles Remain

The three-story expansion building will rise on an underused parking lot. Gensler designed the project, while Kimley-Horn & Associates Inc. will handle landscaping.

As part of the project, the nearby Salt River Project substation currently powering the data center will also be expanded. In addition, the owner will replace the entire facility’s old water-cooling system with an electric air-cooling method.

The PBJ report noted that local residents’ concerns about noise at the data center were a factor in delaying approval of the expansion.

Kristen Vosmaer, managing director on JLL’s Data Center Work Dynamics team, told Commercial Property Executive that noise is indeed a growing issue for data centers.

“Data centers do face scrutiny over noise, a factor increased in developments near residential areas, as well as around natural habitat,” she said. “Generators and air handlers both can emit noise above permitted decibel levels. We increasingly see permit applications facing the same level of scrutiny on noise as they receive over water, habitat, and right-to-light issues. Proper noise abatement strategies require zoning knowledge, understanding of one’s design and its implications, and effective mitigation strategies to counter the emittance in both greenfield and retrofit developments.”

Data in the desert

In May, QTS Realty Trust announced plans to develop a 3 million-square-foot data center campus in Glendale, Ariz. The 375-acre QTS PHX 3 project could include up to 16 buildings of about 180,000 square feet each.

QTS acquired the property, north of Camelback Road and west of Loop 303 along Cotton Lane, for $255.3 million in July 2022 from First Industrial Realty Trust.

Major considerations for data center development this year include innovative, energy-efficient approaches to powering and cooling these projects, according to a CBRE 2024 market outlook. In fact, some construction timelines have been delayed by as much as 24 to 72 months because of difficulties in securing adequate power supplies.

Demand for new data centers is expected to attract greater institutional investment, while the forecast for development in primary U.S. markets is about 3,000 MW.

The post CBRE IM to Expand Phoenix Data Center appeared first on Commercial Property Executive.

Configured to meet the increasing needs of hyperscalers in Texas and beyond, the $400 million project rises on 135 acres at the intersection of West Military Drive and Loop 1604. Each building in the San Antonio III campus is set to feature up to 40 MW and a proprietary design to serve customers’ near-term cloud and artificial intelligence infrastructure needs.

The design builds on Stream’s environmental commitment and also makes the AI-ready facilities even more efficient as customers move to liquid-cooled high density AI workloads. However, the data halls will be designed to accommodate both air and direct liquid-cooled IT infrastructure.

READ ALSO: Prologis, Blackstone Double Down on Data Centers, but Hurdles Remain

The new data center campus will also comprise an onsite 334 MW CPS Energy substation with access to important data center hubs in nearby Westover Hills, Texas, as well as in Texas Research Park. The substation will have a 2N configuration.

Other key features include:

• 120 MW of IT capacity available for new tenant deployments
• Use of closed loop chillers, resulting in minimal water use
• Secure campus configuration to support tenant requirements for buildings with individual secured perimeters or for the combination of lots on the parcel.

San Antonio expansion

The new campus will be located less than 5 miles from Stream’s San Antonio II data center complex which opened in 2014 at 9550 Westover Hills Blvd. The company entered the San Antonio market in July 2008, when it acquired a 150,000-square-foot, 30 MW facility at 5200 Rogers Road that was sold to a Fortune 10 company in 2011.

Stream Data Centers is the technical real estate affiliate of Stream Realty Partners. Since its 1999 inception, it has acquired, developed and managed more than 27 data center projects in major markets across the country including Dallas-Fort Worth, Houston, Phoenix and Chicago.

The post Stream Data Centers Breaks Ground on $400M Campus in San Antonio appeared first on Commercial Property Executive.

5C Data Centers is expanding CMH01, its 200 MW data center in Columbus, Ohio. The firm acquired a 66,000-square-foot live data center that will grow to 320,000 square feet in the next development phase.

Work is underway at the 40-acre property, facilitated by a partnership between 5CDC and the local utility. The initial 100 MW is scheduled for completion in the first quarter of next year, while the first shell is fully leased and will reach its full capacity by the third quarter of this year.

CMH01, the firm’s first mega campus, is anticipated to be one of the largest data centers in the region. It will feature 42 data halls optimized to accommodate average densities of more than 500 W per square foot.

READ ALSO: AI Is Changing the Game for Data Centers

First Energy will power the development through its own substation. With additional power capacity being secured, the project will have significant potential for scalability over time.

The owner is also planning to develop a 25-acre data center in the Dallas-Fort Worth metro. That project is set to encompass 240,000 square feet of data hall space with up to 144 MW at full build-out.

Data centers on the rise

As demand for cloud and AI grows, operators are focusing on building larger developments for hyperscale users. This includes securing more extensive power resources and acquiring larger land parcels across different regions.

In September, Aligned Data Centers entered Ohio with the purchase of a 129-acre site. The Sandusky development has 1.3 million square feet available for construction and is equipped with power feeds capable of delivering up to 80 MW, expandable to more than 200 MW.

Around 27.4 million square feet of data center space were under construction as of April, according to a CommercialEdge report, while another 33.5 million square feet were in different planning stages. As of June, Columbus had 35 facilities totaling more than 7.1 million square feet completed, with 2.7 million square feet underway across six developments, the same source shows. 

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Compass Datacenters, of Dallas, has begun work on a hyperscale data center campus in Hoffman Estates, Ill. The project is taking shape on the nearly 200-acre former Sears headquarters site.

The Chicago-area campus will include five hyperscale data centers and will be Compass’ first hyperscale campus in Illinois. The firm estimates the project’s value on completion at about $10 billion in local investment.

Commonwealth Edison, Northern Illinois’s largest electric utility, will provide infrastructure upgrades for the project, which will include a new onsite substation that will be energized in mid-2026.

READ ALSO: Prologis, Blackstone Double Down on Data Centers, but Hurdles Remain

The fate of Sears’ seven-building campus had been up in the air ever since the once-giant retailer filed for bankruptcy in 2018. Plummeting demand for office space during and since the pandemic didn’t help, making finding a new future for the site difficult.

Compass acquired the property in September 2023. The site is now being prepared for structural demolition, which will begin this summer. Construction is scheduled to start next year.

Compass CEO Chris Crosby said, in a prepared statement, the company is taking a methodical approach to demolition, so this work will take more than a year to complete. As the existing buildings come down, concrete, stone blocks and asphalt from the site will be repurposed as fill and as aggregate in concrete production. Compass uses an AI application to help optimize these types of locally available materials for concrete production to reduce greenhouse gas emissions.

A central hub

A JLL report on data centers in the U. S. highlighted metropolitan Chicago as a market that can anticipate substantial data center growth over the next five years.

In February, Edged Energy announced that its U.S. debut would consist of four data centers totaling more than 300 MW. One of the four will be a three-building, 96 MW facility in Aurora, Ill.

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This week, Vantage Data Centers completed a $9.2 billion equity raise to fund its growth across North America and EMEA, accelerating and extending the company’s strategic capabilities to partner with global hyperscalers in meeting unprecedented cloud and AI demand.

Silver Lake and global alternative asset manager DigitalBridge Group managed the investment vehicles.

The raise was significantly oversubscribed and upsized by $2.8 billion with participation from multiple global investors.

READ ALSO: How AI is Boosting the Data Center Market

Aggregate new investment in Vantage over the past nine months totals approximately $11 billion, of which more than $7 billion is primary equity. That includes a €1.5 billion ($1.6 billion) investment by Australian Super in September 2023.

Primary proceeds will be used to fund Vantage’s growth across North America and EMEA, accelerating and extending the company’s strategic capabilities to partner with global hyperscalers in meeting unprecedented cloud and AI demand.

Vantage owns or controls more than 25 sites in North America and Europe, the Middle East and Africa, totaling over 3 gigawatts of expected capacity. The company anticipates that the new funding will drive an estimated $30 billion of additional development.

Demand outpacing supply

Carl Beardsley, senior managing director and JLL Capital Market’s Data Center leader, told Commercial Property Executive the data center sector continues to attract large equity commitments.

“Demand is far outpacing supply, vacancy is at an all-time low, and lead times to obtain scalable power at these sites is a challenge,” Beardsley said.

“Data center developers often like to acquire and build multi-building campuses which were historically built over time but with the growth in the sector, we are experiencing pre-commitments from end users on full campuses. This has pushed forward the development cycle of data center campuses and the need for more equity at a quicker pace.”

Howard Berry, principal, National Data Center Solutions with Avison Young, told CPE that investors are showing a strong interest in data centers due to record-low vacancy rates of 2 percent in North America and a projected tripling of the current 14 GW capacity to 60 GW over the next five years.

“This growth is driven by the increasing demand for AI and large language models,” Berry said. “As an example, a typical AI data center tenant will spend over $50 million on GPU chips for every 1 MW of deployment, and there is 1,000 MWs in a GW. As digital transformation continues, the need for robust and scalable data storage and processing solutions will likely sustain investor interest in the sector for the foreseeable future.”

CommercialEdge’s Doug Ressler confirms the interest investors are seeing in data centers, which can provide stable rental income due to long-term leases with tenants.

As AI data center demand grows, property values may appreciate over time, and investing in data centers diversifies a real estate portfolio beyond traditional asset classes.

As a real estate investment, data centers offer tax benefits, including depreciation deductions.

AI’s ‘just in its infancy’

Robert Martinek, director at EisnerAmper, told CPE that most market participants believe that AI is in its infancy and global data center electricity demand could double over the next four to five years.

“Data center demand from investors commenced with the emergence of Bitcoin mining,” Martinek said. “Lately, demand has been directly fueled by the increase in artificial intelligence. Since AI requires massive energy consumption, data centers have seen significant increases in occupancy and rental rates during the past 12 to 15 months.”

The demand in the U.S. economy for services such as AI and cloud computing is high and is expected to continue for decades, Johnathan Meade, chief operating officer at Meade Engineering, told CPE.

“Data centers provide the necessary infrastructure to support the next wave of the technological revolution,” he said.

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Alternative asset manager CIM Group has closed on an initial $125 million loan commitment to fund the construction of Applied Digital Corp.’s high-performance computing campus in Ellendale, N.D. The note can increase to as much as $200 million.

The three-year, 12.0 percent note’s initial commitments totaling $125 million are supplemented by an accordion feature allowing for up to $75 million in further borrowings. The data center will offer massive computing power and support HPC applications.

APLD began construction on the 100 MW, 342,000-square-foot first building in Ellendale in October 2023. The campus has more than 600 MW of future capacity.

Wes Cummins, CEO of APLD, told Commercial Property Executive that his company has executed a letter of intent with a U.S.-based hyperscaler for a 400 MW capacity lease at the Ellendale campus. He added that the commitment encompasses the company’s 100 MW facility under construction and plans for two additional buildings.

Simpson Thacher & Bartlett LLP was CIM Group’s legal counsel, while Milbank LLP and Lowenstein Sandler LLP represented APLD.

Ellendale is almost on the South Dakota state line, roughly 125 miles southeast from Bismarck, N.D. Cummins also referenced APLD’s Jamestown, N.D., campus, which is nearing completion with an additional 100 MW HPC facility. Jamestown is about 100 miles east of Bismarck along Interstate 94.

Power before land

In March, APLD agreed to sell a recently completed 200 MW cryptocurrency mining campus in Garden City, Texas, to Marathon Digital Holdings, one of APLD’s customers, for about $97 million. The transaction was motivated in part by APLD’s desire to reallocate capital to North Dakota, Cummins said at the time.

CPE‘s 2024 data center outlook highlighted rock-bottom vacancies in multiple primary markets, including Northern Virginia. One of the major drivers of data center development this year is simply the availability of enough power, to the extent that developers typically negotiate a power commitment even before nailing down a land purchase.

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Denver-based STACK Infrastructure has raised $1.3 billion in financing for its ongoing global data center development strategy. Funds also include green construction debt refinancing for the expansion of its large-scale shell and turnkey campuses, several being located in the U.S.

To date, STACK has secured more than $12 billion in financing to expand its global footprint of scalable data center campuses.

Plans for the new financing

Three Virginia campuses will see multimillion-dollar expansions with proceeds from this latest financing. Some $350 million in green financing will be used for the expansion of a 150 MW campus in Manassas. Another $301 million will support further development at a 200 MW campus in Loudoun County and $100 million will refinance construction debt that encumbers a 420 MW campus in Prince William County.

READ ALSO: Prologis, Blackstone Double Down on Data Centers, but Hurdles Remain

STACK currently has several scaling opportunities, including five in the U.S. and one in Toronto, where a 19-acre campus with an 8 MW data center has 48 MW in expansion capacity. U.S. projects feature:

• A 48 MW data center in Santa Clara, Calif., with immediately available space, 12 MW of turnkey capacity and committed power from Silicon Valley Power, a not-for-profit municipal electric utility owned and operated by the city of Santa Clara
• A 55-acre, 200 MW campus in Portland, Ore., with 24 MW of available capacity
• A 48 MW build-to-suit opportunity in the Dallas-Fort Worth area, with abundant power and connectivity options
• A 58 MW data center campus in New Albany, Ohio, with immediately available capacity and build-to-suit expansion opportunities
• A 250 MW campus in central Phoenix, with a dedicated on-site substation.

STACK also plans to use $560 million in green financing to expand its footprint in the APAC region, including the development of a 180 MW campus in Melbourne, Australia. In addition, a campus in Milan, Italy, will see some of the funding as $60 million in construction financing will be used to expand its power capacity to 25 MW.

Previous round of financing

The previous round of financing for STACK closed in April, when the firm raised $3.3 billion. That green funding included $1.4 billion to expand its Silicon Valley presence by developing water and energy-efficient digital infrastructure and other regional investments.

It also earmarked $750 million for STACK facilities in Loudoun County, Va., to integrate cutting-edge cooling stations and incorporate low-carbon materials into the design such as green concrete and recycled steel.

The company also allocated $1.2 billion of the green financing for Milan campuses to support water-efficient infrastructure and enhance power usage among other initiatives.

Silicon Valley growth

In March, STACK announced a groundbreaking and expansion of its 100 MW campus in San Jose, Calif., known as SVY01, with a 60 MW data center addition that will provide critical capacity and scale in one of the largest and most desirable data center markets in the world. The expansion includes two data centers, an advanced manufacturing facility and parking structure.

The expansion is expected to meet the growing demand for cloud and high-density workloads. STACK is also collaborating with PG&E to develop new power infrastructure in the area, to help provide a more reliable, safe and scalable grid for public and private use.

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QTS Realty Trust is expanding its presence in metro Phoenix. Plans call for a 3 million-square-foot data center campus in Glendale, Ariz., called QTS PHX 3, that could include 16 buildings of approximately 180,000 square feet each.

The 375-acre development site is north of Camelback Road and west of Loop 303 along Cotton Lane. QTS acquired the property in July 2022 for $255.3 million from First Industrial Realty Trust.

Designed to meet rapid, large-scale deployments, QTS Glendale is expected to have more than 750 megawatts of critical power capacity. A 29-acre substation is also slated for the site that has room for future growth, the Phoenix Business Journal reported.

READ ALSO: Where Innovation Drives CRE Demand

While development timetable was not provided, the project is expected to take several years to build once it receives approvals. QTS filed the initial plans with the City of Glendale in early 2023, several months after purchasing the site, according to PBJ.

“Data centers are large, complicated projects that require both thousands of skilled construction employees and specialized maintenance professionals once the site is in operation. We choose markets like Phoenix and Glendale because of access to a highly skilled and motivated workforce,” a QTS spokesperson told Commercial Property Executive.

QTS’ expansion in the Valley

The Glendale site will be the third location for the Blackstone-owned QTS in the Phoenix metro area. Last year, the company started building another phase at its 85-acre campus at 1200 40th St. in Phoenix. The multi-building campus is planned for 280 MW of capacity.

Another QTS data center is at 120 E. Van Buren in Phoenix. The facility has a 288,000-square-foot building and 32 MW of utility power capacity.

“QTS is investing in Arizona as a long-term partner and will continue to work with the state, counties and cities where we operate to ensure growth is additive to the area. As a colocation provider, we look to enter areas that are attractive to potential tenants as well,” the spokesperson concluded.

Private equity giant Blackstone acquired QTS, based in Overland Park, Kan., for $10 billion in June 2021. In July 2023, Blackstone announced it sold off other assets to fund an $8 billion commitment to build new data centers through QTS.

Phoenix, a growing data center market

A recent JLL North America data center report classified Phoenix as a primary data center market along with Atlanta, Chicago, Dallas-Fort Worth, Northern Virginia, Northern California and New Jersey. The secondary markets included Salt Lake City, Los Angeles, New York, Denver, Houston and Austin, Texas.

The Phoenix market ranked second after Northern Virginia for new transactions in 2023, totaling 784 megawatts, according to the report. The Valley had nearly 700 MW under construction at the end of last year, representing 100 percent of stock. The metro is expected to grow at significant rates over the next 5 years, alongside Dallas-Fort Worth, Chicago and Northern Virginia.

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What was once a niche real estate sector is now attracting billions from the largest names in the industry. And with the rapid expansion of the data center industry, energy needs are also growing exponentially. In fact, data center energy needs are bound to more than double by 2030.

Development activity is intense—according to a recent CommercialEdge report, some 27.4 million square feet of data center space was under construction as of April, with an additional 33.5 million square feet in planning stages. Institutional investors such as Prologis, Blackstone, DigitalBridge, EQT and KKR have been pouring billions into the sector for many years.

Of course, AI is a big part of the current boom, as the technology promises to upend most aspects of our lives. Whether these promises will come true or not is another story entirely, but what’s clear is that the frequency and amount of investments have been growing considerably lately.

A string of high-conviction deals

This year alone, Vantage Data Centers secured $6.4 billion in equity from its key investors, DigitalBridge and Silver Lake. The company also plans to leverage a sizeable land bank and spend another $30 billion over the coming years. EdgeCore secured $1.9 billion in green funding for a development in Mesa, Ariz., and in late 2023, Blackstone and Digital Realty formed a $7 billion venture to build more data centers across primary markets. Earlier, in 2021, Blackstone acquired QTS Realty Trust for $10 billion, marking the giant’s largest expansion toward data centers, and one of the largest such deals for the sector up until that point.

A Blackstone spokesperson told Commercial Property Executive that data centers now represent one of the highest conviction investment themes at the firm, with once-in-a-generation demand growth that is driven by AI and cloud adoption.

Another investment giant, Prologis—which has been active in the data center industry since 1999—ramped up its investments into the sector considerably. In the last quarter of 2023 alone, it started more than $500 million in new data center projects across the U.S. Moreover—while industrial real estate will remain its primary focus—Prologis expects to leverage its considerable land bank to pour up to $8 billion in additional investments and develop another 20 data centers over the next five years, according to the company’s Global Head of Data Centers Chris Curtis.

These are just some recent moves in the industry, among many others. And even though Julie Brewer, senior vice president of finance at EdgeCore, noted that the data center industry is very capital-intensive and liquidity is crucial, money will keep rolling in, with hopes that the most stringent issue will be solved: energy consumption.

Data center energy requirements strain the grid

Data centers consume an immense amount of power. To put this into perspective, a single hyperscale data center of 100 megawatts or more—the type used to power AI or other HPC applications—can consume enough energy in a year to power around 80,000 households, according to the U.S. Department of Energy. And this will only go up. Data center energy requirements are bound to double, according to a recent Newmark report, from 17 gigawatts in 2022 to 34 gigawatts by 2030.

The U.S. grid is split between 3,000 independent utilities. There’s plenty of supply, but one of the biggest challenges is bringing power—both conventional and from renewable sources—to where it’s needed, said CBRE Executive Managing Director & Global Head of Data Center Solutions Pat Lynch.

Between the 1970s and 2000s, power load growth was relatively flat and transmission infrastructure was not a priority. Today, the grids are trying to catch up and upgrade with new high voltage power lines, substations and electricity infrastructure, Lynch said.

In Northern Virginia, the largest data center market on the planet, provider Dominion Energy has connected 94 data centers with more than 4 gigawatts of capacity since 2019, according to its first-quarter earnings call. Another 15 data centers are expected this year, with individual facility demand ranging between 60 and 90 megawatts. Requests for very large facilities are also growing, ranging from 300 megawatts to several gigawatts.

But upgrading the grid takes time. Something that stakeholders in the sector can do now is seek alternative solutions. For example, Amazon recently purchased a nuclear-powered facility in Pennsylvania, where it aims to develop up to 960 megawatts of data center capacity. Although nuclear power is not exactly renewable, Lynch mentioned, it does not have the same emissions as coal or natural gas and is recognized by many executives as an important component for future demand.

Working to advance data center technology to achieve higher efficiencies will be of equal importance and energy efficiency is not just about electricity. Brewer believes that considering each region’s unique climate and geographic attributes is the first step to ensuring this efficiency in using energy and natural resources.

As an example, EdgeCore’s upcoming facility in Mesa will be water-neutral, keeping in mind the region’s water scarcity. Blackstone told CPE that virtually all of QTS’ designs from 2019 onward are also waterless.

Secondary, tertiary markets to see record growth

As primary markets continue to face unprecedented supply chain challenges driven by power capacity issues and land entitlement hurdles, interest in secondary and tertiary markets will expand rapidly, Brewer expects. Emerging markets—Mississippi, Wisconsin, Arkansas, Idaho, Indiana, to name a few—offer several advantages, including access to near-term power, supportive communities and local governments and the scale needed to plan services into the far future, she added.

Players are already making moves into these untapped markets—Microsoft plans to spend $3.3 billion in Southeast Wisconsin, aiming to transform it into a hub for AI-powered economic activity. Also, fifteenfortyseven Critical Systems Realty and Green Fig Land Co. unveiled a 2 million-square-foot campus in metro Philadelphia, while PowerHouse Data Centers closed on a site in Reno, Nev., marking its first project outside Northern Virginia, valued at $400 million.

Some potential downsides to these up-and-coming markets include constrained access to robust fiber infrastructure and a more limited pool of adequately trained personnel, according to Brewer.

But irrespective of where these investments are made, there are other businesses that will continue to push the data center industry to new highs. Cloud computing is also expected to continue to be a robust driver for the sector in the foreseeable future. In conjunction with AI initiatives, businesses keep modernizing their infrastructure and driving efficiency by leveraging information technology.

“IT used to be viewed only as an expense, while now it is viewed as an investment,” Lynch said. “For example, if you are launching a global software business, data center infrastructure is paramount to the success of your business. More data use creates the need for more data centers and digital infrastructure,” he added.

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A joint venture between PowerHouse and Harrison Street has purchased a 50-acre site in Irving, Texas. Plans call for the construction of an almost 1 million-square-foot data center campus that will boast 200 MW of power at full build-out.

This marks the duo’s entrance in the Dallas-Fort Worth market and their sixth data center development.

Dubbed PowerHouse Irving, the campus is set to feature three powered shell data centers rising up to three stories, each with a 67 MW power load. Construction is expected to start early next year, with completion of the first powered shell set by the end of 2025.

Located at 111 Customer Way in the Las Colinas master-planned community, the campus will rise in the second-largest data center market in the country. Additionally, the site has immediate access to permanent power from an existing adjacent substation, serviced by Oncor.

PowerHouse’s growing data center inventory

PowerHouse Data Centers, a wholly owned division of American Real Estate Partners, currently has 30 facilities underway or in different planning stages, which will total 10.5 million square feet of data center space and more than 2.3 GW of power.

The company started with projects in Northern Virginia and is expanding in key markets across the U.S. Last month, PowerHouse and Harrison Street topped out ABX-1, their first data center in NoVa. The 265,850-square-foot building will initially provide 60 megawatts, with plans to increase it to 80 megawatts of total available power.

In January, the duo also acquired the site for a 900,000-square-foot powered shell data center campus in Reno, Nev., its first such project outside Northern Virginia. The three-building development’s total value is estimated at $400 million.

Data centers are becoming investors’ favorites

According to DLA Piper’s 2024 Real Estate State of the Market Survey, enthusiasm about data centers is picking up, with 53 percent of survey respondents mentioning it as the most attractive asset class, up 21 percent from last year.

Additionally, there were 27.4 million square feet of data centers under construction as of March, with an additional 33.5 million square feet in planning stages, a CommercialEdge industrial report shows. In 2023, construction starts increased to 14.2 million square feet, up from an average of 10 million square feet in previous years.

In April, Vantage Data Centers obtained a $3 billion green loan for the expansion of its Northern America footprint, bringing its 2024 funding to $10 billion. Plans call for the construction of VA3, a 288-megawatt campus in Ashburn, Va.

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Flexential is gearing up to build a new 249,000-square-foot, 22.5-megawatt data center complex in Parker, Colo., roughly 20 miles outside of Denver. The planned colocation facility will be the firm’s fifth and largest project in the Denver area, bringing its portfolio in the metro to 759,000 square feet and 49.4 megawatts.

Leasing at Flexential’s latest project will begin in the second half of this year, while the facility is expected to break ground in the second quarter of 2025. With an expected opening in 2026, the data center will be the latest addition to the firm’s FlexAnywhere platform, which allows customers to access portfolio-wide interconnections with cloud providers, alongside data protection and in-house professional services.

READ ALSO: AI Is Changing the Game for Data Centers

The new 17-acre Parker facility will be geared primarily towards businesses in the manufacturing, healthcare and financial services sectors. The data center will benefit from the area’s rich natural resources and a lower risk of natural disasters in comparison to some Eastern and Southern markets.

As part of a recent collaboration with Applied Digital, servers in the facility will be equipped with Nvidia H100 Tensor Core graphics processors, which are designed for exascale computing. Additionally, they can more quickly train large language models for artificial intelligence platforms.

Flexing muscles

A yearly update from Commercial Property Executive found that power availability and reliability are among the top considerations for data center developers amid the ongoing AI boom, pushing many new projects into secondary markets and rural areas. 

A similar mindset has motivated the locations of some of the Flexential’s recent expansions. In July, the firm broke ground on two new developments in Atlanta and Portland, Ore., also part of the FlexAnywhere platform. The facilities have a total output of 110 megawatts.

Northern Virginia and Silicon Valley currently dominate the power consumption competition, respectively outputting 2,552 and 615 megawatts.

Data centers dominate investment portfolios

DLA Piper’s latest State of the Market Survey found that data centers have become the most attractive assets for commercial real estate investors, with 53 percent of survey identifying them as their top prospect.

Last week, Wisconsin’s data center market received a boost as Microsoft announced an investment package of more than $3 billion that will see the expansion of the company’s current campus project in Mount Pleasant. The project will also include educational collaborations with Gateway Technical College, the University of Wisconsin-Milwaukee, United Way Wisconsin and Racine, as well as the Racine Unified School District.

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President Joe Biden joined Microsoft Vice Chair & President Brad Smith for the announcement at Gateway Technical College in Racine, Wis.

The investments reportedly will unfold in four phases. In the first, Microsoft will invest $3.3 billion through 2026 to expand its previously unveiled data center development in Mount Pleasant, Wis. This additional cloud and AI infrastructure capacity is intended to benefit companies in Wisconsin and across the country.

In addition to building the data center, Microsoft will partner with Gateway Technical College to build a Data Center Academy, which will train and certify more than 1,000 students in five years to work in the new data center and at new IT sector jobs in the region.

In the second phase, Microsoft will establish a manufacturing-focused AI Co-Innovation Lab at the University of Wisconsin–Milwaukee, reportedly the first of its kind in the U.S. The lab is intended to connect Wisconsin manufacturers and other companies with “Microsoft’s AI experts and developers to design and prototype AI and cloud solutions to improve and accelerate their work and grow their business,” according to Microsoft.

READ ALSO: How AI is Boosting the Data Center Market

Third, Microsoft will partner with United Way Wisconsin, United Way Racine and other community partners to upskill more than 100,000 people on generative AI across Wisconsin by 2030. The curriculum reportedly will help train residents to use new applications, including Microsoft Copilot, a suite of Microsoft AI services.

Further, Microsoft will work with Gateway Technical College to train and certify 3,000 local AI software developers and provide opportunities for 1,000 local business, civic and government leaders to participate in bootcamps in which they can learn how to adopt generative AI into their organizations.

Finally, in support of local education and youth employment, Microsoft will partner with the Racine Unified School District (RUSD) and work with Girls in STEM to expand its program to two additional RUSD middle schools. This will provide access to STEM education for more than 500 middle school–aged girls over the next five years.

To provide green energy for the campus, Microsoft has partnered with National Grid to build a new 250 MW solar project in Wisconsin that will begin operation in 2027. By that point, Microsoft will surpass 4,000 MW of power added into the local grid—or enough electricity to power more than 3 million homes.

In addition, the new data center will use a closed-loop cooling system to recycle water; the system will therefore require no additional water after startup.

Checkered history

This part of Southeast Wisconsin experienced substantial disappointment in recent years following the 2017 announcement by Taiwanese multinational contract electronics manufacturer Foxconn Technology Group that it would invest up to $10 billion in a manufacturing campus. When ground was broken in June 2018, then President Trump attended the event.

Since that splash, however, Foxconn’s actual investments and job generation have fallen very far short of what was initially projected. For example, the Milwaukee Journal Sentinel reported in March 2023 that as of then, only 1,454 jobs, not 13,000, had been created, and that Foxconn’s investment in the site totaled $672.8 million, rather than $10 billion.

The post Behind Microsoft’s $3.3B Wisconsin Data Center Project appeared first on Commercial Property Executive.

Caution may still be the watchword in commercial real estate, but a sense of optimism appears to be growing. At least, that’s according to DLA Piper’s 2024 Real Estate State of the Market Survey, where more than one third of CRE leaders surveyed—37 percent—responded that they are bullish about the sector over the year ahead.

While 63 percent of leaders are still bearish, that’s a notable change from the 2023 DLA Piper mid-year outlook, in which 86 percent of survey respondents reported a bearish market view. The study, which has been conducted since 2009 and surveys CRE leadership on their views about the next 12 months, showed a resilience and optimism in the industry.

“I think that this is actually quite significant,” John Sullivan, chair of the U.S. real estate practice & co-chair of the global real estate sector at DLA Piper, told Commercial Property Executive. “What it shows is that, although there’s still a lot of concern and uncertainty in the market, the skies are starting to clear and people are getting more confident that we’re at, or at least near, a place in the cycle where it’s going to make sense to start reinvesting.”

Why is leadership sentiment trending upwards? Mostly interest rates.

Interest rates and external drivers remain key

Last year’s State of the Market Survey revealed that a more negative or cautious leadership outlook stemmed largely from economic headwinds. Interest rates were named in 46 percent of responses last year and are again a key driver of CRE sentiment.

But how interest rates are influencing investors has altered. Of those who were bullish in this year’s survey, 28 percent indicated that the stabilization of interest rates is the top reason for their optimism. Another 20 percent cited the potential for lower interest rates.

Yet interest rates also figure prominently in the thinking of more bearish leaders. Thirty-one percent cited the issue as the number-one reason for their caution. To put these responses in perspective, it’s important to note that the survey was conducted in February and March, when the consensus was still that the Federal Reserve would cut rates several times this year. The Federal Open Market Committee’s decision last week to leave rates unchanged makes decreases less likely this year.

But even considering the altered expectations on interest rates, Sullivan doesn’t think that responses today would vary much from those in February and March. While rates may stay put longer, the general sentiment that stability and lower rates are ahead in the near term is still common among investors. Instead of focusing on specific months when rate cuts might happen, investors are training their sights on the larger picture.

“It’s more about the trend over the next six, 12 to 18 months, and I think that the feeling is still that the interest rate trend is more likely going to be down instead of up,” Sullivan noted.

Beyond interest rates, inflation continues to loom large; 74 percent of survey participants expect rising prices to have an impact on CRE throughout the next year. Similarly, 73 percent responded that the upcoming U.S. election will be impactful. And up 8 percent from last year, 59 percent of leaders indicated that geopolitical conflicts will impact CRE.

Which assets pose opportunity

In alignment with the uptick in positive sentiment, survey respondents mostly anticipated transaction volume in CRE to increase this year. While this won’t be without some headwinds, such as the $1 trillion in CRE debt coming due by year’s end, industry leaders are finding opportunity.

In a lemons-to-lemonade trend, respondents indicated that investment opportunities surrounding distressed assets are among the top five reasons for optimism this year.

Regarding property categories, the survey identified several that are rising in popularity. Leading the pack, data centers were named by 53 percent of survey respondents as the most attractive assets, up 21 percent from 2023. “Across the industry, analysts and investors are very bullish about the prospects of data centers,” Sullivan said.

Multifamily followed with 43 percent. Logistics, warehousing and cold storage came in at 38 percent, marking a 15 percent drop since 2023.

READ ALSO: How CRE Deals Are Changing: DLA Piper

For all its much-discussed challenges, the office sector also inspired some positive notes. Sullivan believes that the source of optimism is twofold. First, there are the signs that in-person office work is increasing. And second, prices are adjusting to the point where new investment in the sector makes sense.

Similar to the 2023 State of the Market Survey, most leaders (59 percent) anticipate that in one year, roughly 50 percent of workers in urban areas will be back in the office consistently. Almost half of respondents, 47 percent, answered that office building vacancy will never return to pre-pandemic levels. Yet 37 percent of leaders were more optimistic and predict that vacancy will return to former rates more than three years from now.  

According to the survey, repurposing space, including offices, is an attractive investment opportunity for 20 percent of respondents. And the redesign or rethinking of office spaces will continue to be impactful this year, 64 percent believed.

Where investors want to be

Industry leaders are still looking to gateway cities for opportunity, but the favored choices have evolved somewhat. While markets that were popular last year, such as Miami, Nashville, Austin and Dallas-Fort Worth, still present attractive investments, overall sentiment for these areas either remained the same or decreased compared to 2023 results.

Conversely, sentiment for major tier-one cities is on the upswing. When compared to 2023, optimism is up 5 percent for New York City, 12 percent for Chicago, 9 percent for Los Angeles by 9 percent and 8 percent for San Francisco.

Part of the reason Sullivan attributes the increased investor interest in gateway markets is pricing. With the higher cost of debt and general market volatility, investors are looking for better-priced assets.

“The places where owners have been most willing to recognize significant decreases in value have been in some of those gateway cities,” he noted.

The post Bears Dominate but Bulls’ Numbers Grow in DLA Piper Survey appeared first on Commercial Property Executive.

Vantage secured the funds with an initial collateral pool of eight leased and greenfield sites in new and existing markets, totaling 1.4 gigawatts of IT capacity. The structure of the green loan allows for faster time-to-market than typical construction financing and includes the option to add more assets to the credit facility.

This new round of financing brings Vantage’s total to $10 billion for 2024, already as much as the company secured throughout the entire last year. In January, the data center provider landed $6.4 billion in equity led by DigitalBridge and Silver Lake. In March, it obtained $64 million for the development of its first data center in Taiwan.

Ready for AI deployments

Vantage’s North America platform currently includes 12 campuses across the U.S. and Canada. Commercial Property Executive reached out to the company to find out which of these campuses are involved in this deal, but Vantage declined to comment.

However, it is almost certain that one of properties is VA3 in Ashburn, Va. This is an upcoming, 288-megawatt campus, set to encompass 2.8 million square feet upon full buildout. Vantage applied for its development in last February, according to Data Center Dynamics. The company had acquired the 134-acre plot of land at 19509 Belmont Ridge Road for $180 million in 2022.

READ ALSO: Where Innovation Drives CRE Demand

VA3 will be Vantage’s third campus in Ashburn, planned to include seven multi-story data centers powered by two Dominion Energy substations. According to its data sheet, it will be capable of power densities of up to 300 watts per square foot, which is on the higher end.

This density indicates the campus will be ready for AI deployments. In December, Vantage Senior Vice President Steve Conner told CPE that AI will require rack densities up to five times higher than traditional cloud computing—which, in turn, will have more complex cooling requirements.

Green loans pave the way for sustainable development

Vantage secured this fifth green loan under its Green Finance Framework, which guides development and sustainability strategy along five core areas: greenhouse gas emissions, energy, water, waste and community. Under this framework, data centers will need a power usage effectiveness of 1.5 or below to qualify.

Loudoun County, Va., where Vantage’s new campus is located, is among the top areas in the U.S. for leasing activity, according to a recent CBRE report on North American markets. This area has had issues with power delivery in the past, as it is one of the densest data center regions in the world. However, the same research shows that Dominion Energy—the main provider for Virginia—is working on new transmission lines that are bound to deliver sufficient capacity by 2026.

PowerHouse Data Centers recently closed on a 145-acre site in Spotsylvania, Va., for a massive, 800-megawatt campus. It is developing the project in a joint venture with Harrison Street and plans to deliver an initial 150 megawatts by October 2025.

Speed-to-market in Northern Virginia is primarily driven by power and entitlement timelines. Still, the market remains a top choice for developers, with vacancy rates at roughly 1.4 percent as of December, and more than 1.2 gigawatts of capacity under construction, CBRE data shows.

The post Vantage Lands $3B Green Loan for North American Expansion appeared first on Commercial Property Executive.

The 2024 CPE Influence Awards recognize the commercial real estate industry’s most noteworthy properties, projects and transactions. Does your office have amenities that attract new tenants? Are you the top broker at your firm? Were you able to successfully reposition a property? We want to celebrate your successes.

We will be accepting entries until 6/28.

READ ALSO: Entering the CPE Influence Awards? Try These 10 Tips

Explore our categories:

• Best Amenities
• Broker of the Year
• Most Innovative Corporate Strategy
• Most Effective DEI Program
• Best Design
  • Industrial
  • Mixed-Use
  • Office
  • Retail
• Best Development
  • Industrial
  • Mixed-Use
  • Office
  • Retail
• Development Company of the Year
• Best ESG Program
• Executive of the Year
  • Industrial
  • Mixed-Use
  • Office
  • Retail
• Best Financing
• Humanitarian Award
• Best Investment Transaction: Portfolio
• Best Investment Transaction: Single Property
• Best Lease
• Most Effective Property Management Program
• Property Manager of the Year
• Most Effective Repositioning/Redevelopment Plan
• Rising Star
• Most Innovative Technology
• Unbuilt

New for 2024:

• Brokerage Office of the Year
• Best Design: Data Centers
• Best Development: Data Centers
• Interior Design
• Top CRE Social Media Influencer

The 2024 winners will be selected by a panel of judges representing expertise across all commercial disciplines. Interested in being considered for the judging panel? Email Jessica Fiur.

Winners will be announced and honored later in the year. (Read about the 2023 winners.)

Questions? Contact Editor-in-Chief Jessica Fiur.

The post Deadline Extended: Enter the 2024 CPE Influence Awards appeared first on Commercial Property Executive.

Richmond-based Hourigan has data center plans for a 622-acre site in Greater Richmond, Va., as reported by the Richmond Times Dispatch. Initially dubbed White Oak Technology Park 2, the industrial campus could encompass up to 13 colocation data centers.

The developer has secured an initial approval from Henrico County’s Planning Commission for the rezoning of the site at the interchange between interstates 64 and 295 in Sandston, Va., from agricultural to light industrial use. The new designation would allow for data centers, advanced manufacturing facilities, office space and other related commercial uses.

READ ALSO: AI Is Changing the Game for Data Centers: JLL

Hourigan’s development would be an extension of White Oak Technology Park, a business campus that houses the Richmond Network Access Point (NAP), the only place in the world where four subsea cables, terrestrial networks and data center management overlap.

Hourigan has committed to paying for the necessary water infrastructure for this project, while Dominion Energy is slated to build a 5-mile, 230-kilovolt transmission line for the tech park, according to the same source, with costs estimated at $44.6 million. The energy company is currently working to obtain the necessary approvals.

Data center boom, encouraged

Henrico County representatives have made directed efforts to attract more data center developments in the area. In 2017, the local authorities cut the equipment tax rate from $3.5 to $0.40 per $100 of assessed value.

However, the project is facing opposition from both environmental groups and local historians, despite the go-ahead from the Planning Commission. While the environmental concerns regard water and fossil fuel usage, historians are worried that the development would rise on an important Civil War battlefield.

To placate criticism, Hourigan stated it aims to build the data centers in compliance with LEED Silver standards and is conducting a historical study at the site.

NoVa keeps attracting large-scale projects

It’s no secret that nearby Northern Virginia remains the world’s largest data center market, and the Richmond area is benefiting due to both a spillover effect and several underwater cables hitting land nearby. What’s less known, however, is the market’s growth speed. Northern Virginia data center stock could more than double by the end of this decade, according to several estimates. Case in point, another massive project is hitting its first regulatory hoops.

The Potomac Development Group is eyeing a 9 million-square-foot data center project in King George County, dubbed Dahlgren West, involving the construction of 10 to 15 buildings across 500 acres, the Fredericksburg Free Lance-Star reported. The development is in its very early stages, as plans for the necessary rezoning were not filed yet, but the company is gathering local feedback and hopes to break ground on the project next year if approvals are obtained fast enough.

The company is new to the data center development market and does not intend to lead the build-out of the campus, but rather prepare the site and turn it over to end users, according to Bisnow. The only other large-scale project in the county is, currently, a $6 billion, 869-acre data center development headed by Amazon, the same source reported.

The post 622-Acre Data Center Project Moves Forward Near Richmond appeared first on Commercial Property Executive.

PGIM Real Estate and Equinix Inc. have entered a $600 million joint venture for the development and operation of SV12x, a San Jose, Calif., data center. Upon completion, the facility will be the first xScale data center in the nation.

The two-story asset will be built in two phases. SV12x is anticipated to provide more than 28 megawatts of power capacity once completed.

Situated in the Equinix Great Oaks data center campus, the facility will be developed alongside four already operational Equinix data centers.

READ ALSO: How AI is Boosting the Data Center Market

Downtown San Jose is approximately 11 miles from the up-and-coming facility. The San Jose Mineta International Airport is within some 15 miles.

Phase one of SV12x is scheduled for completion in the second quarter of this year. PGIM Real Estate will own an 80 percent equity interest in the joint venture, while Equinix will control the remaining 20 percent.

A larger demand for data centers

Upon delivery the new xScale project will bring Equinix’s global xScale data center portfolio to more than $8 billion and 725 megawatts of power.

This project marks the second joint venture that Equinix and PGIM Real Estate have embarked on together. With a total commitment of $575 million, the first joint venture was formed in 2021, for the development of two xScale data centers in Sydney, Australia. In 2022, the first building, Sy9x, was completed.

As artificial intelligence explodes, demand for data centers is seeing a significant increase. As such, data center REIT equities have been witnessing an extremely strong performance. Those with global operating scale, such as Equinix, are especially poised to benefit from strong secular growth.

The post PGIM Real Estate, Equinix Enter $600M JV appeared first on Commercial Property Executive.

The new capital will fund ongoing expansion in existing markets, including at DataBank campuses in New York, Denver, Minneapolis, Salt Lake City and Dallas. The facility is supported by a bank group of 14 digital infrastructure banks, including TD Securities as the administrative agent and joint lead arranger.

This facility closely follows DataBank’s February issuance of $456 million in secured notes. The issuance qualified as a green bond based on the projects being refinanced meeting specified sustainability criteria for water conservation, carbon emissions reduction, and power usage. DataBank has a goal of being carbon neutral by 2030.

This new credit facility will allow the company to meet the unprecedented AI-driven demand by shortening financing and construction timelines, especially for its recently announced projects in Northern Virginia and Atlanta.

READ ALSO: How AI is Boosting the Data Center Market

The former refers to an 85-acre campus in Culpeper, Va., that DataBank acquired in November. The property will support up to 192 MW and 1.4 million gross square feet of data center space. Just a month prior to that, DataBank announced the acquisition of a 95-acre campus in Atlanta for the ATL5 project, capable of supporting another 120 MW and 1 million gross square feet of data center space.

Once fully built out, the facilities at those two campuses would nearly double the 375 MW and 2.7 million square feet across DataBank’s current portfolio of 65-plus facilities in 27 metros.

For this latest financing, TD Securities was the administrative agent, joint lead arranger and joint bookrunner. Citizens Bank, CoBank, Deutsche Bank, First Citizens and Société Générale were joint lead arrangers and joint bookrunners, with JP Morgan, Nomura Securities, RBC Capital Markets and Regions Bank joining as joint lead arrangers.  Bank of America and Goldman Sachs were co-documentation agents. Cadence Bank and Preferred Bank also supported the transaction. Jones Day was DataBank’s legal advisor.

Power shortage

Investors are somewhat under-allocated to digital infrastructure, according to a 2024 outlook from CBRE, so that factor—along with underlying demand for new data centers—is likely to drive more institutional investment this year. CBRE predicts a 25 percent increase in new data center construction in 2024, totaling more than 3,000 MW in primary markets.

Power is an issue, however, CBRE reports. “Construction completion timelines have been extended by 24 to 72 months due to power supply delays.”

The post DataBank Launches $725M Credit Facility for Expansion appeared first on Commercial Property Executive.

This demand, however, poses challenges to development, shifting construction to secondary markets. In the 120 markets surveyed by CommercialEdge, 27.4 million square feet of data centers are under construction, with an additional 33.5 million square feet in planning stages. Despite a slowdown in overall industrial starts, data center construction is rising, reaching 14.2 million square feet in 2023, up from an average of 10 million square feet in previous years.

Northern Virginia dominates data center development but faces concerns over power capacity amid AI-driven expansion. Operators are eyeing western or secondary markets for growth. While western regions offer cheaper land and power, water scarcity poses a challenge. Rising water usage in data centers is raising environmental concerns in cities like Phoenix, Salt Lake City and Eastern Oregon.

READ ALSO: AI Demand Boosts Data Center REITs

The under-construction pipeline featured 419.8 million square feet of industrial space at the end of February, accounting for 2.2 percent of total stock, CommercialEdge data shows. Rising interest rates, stricter construction loan standards, balanced industrial demand, and economic uncertainty have collectively dampened industrial construction, which surged in 2021-2022.

New starts plummeted over 40 percent from 2022 to 2023, with only 341.9 million square feet commenced last year. In early 2024, CommercialEdge recorded just 20.0 million square feet, signaling a significant slowdown.

The largest pipelines on a percentage of stock basis were found in Phoenix (11.1 percent, 42.6 million square feet underway), Charlotte, N.C. (4.1 percent, 12 million square feet), Kansas City, Miss. (4.1 percent, 11.2 million square feet), Memphis, Tenn. (3.4 percent, 10 million square feet), Dallas (2.9 percent, 27.2 million square feet) and Denver (2.8 percent, 7.3 million square feet). Meanwhile, industrial sales year-to-date in February totaled $5.7 billion, with properties trading at an average of $132 per square feet.

Stable industrial prices despite demand recovery

National in-place rents for industrial space averaged $7.68 per square foot in February, marking a 750 basis-point increase from the same time last year. Despite this, rents dipped by 4 cents compared to February 2023, according to CommercialEdge data. The Inland Empire maintained its lead in national rankings with a remarkable 12.7 percent year-over-year rent growth. Miami followed closely with a 12.0 percent increase, while both Orange County and Los Angeles surpassed the 10 percent mark, registering growth rates of 11.4 percent.

Meanwhile, national industrial vacancy reached 5.0 percent in February, up 20 basis points from the month prior. Increased new supply entering the market alongside a cooling demand has driven the uptick in vacancy rates, offering relief to highly sought-after markets. Vacancy was lowest in Kansas City, Miss. (2.5 percent), Columbus (2.7 percent), Charlotte and Indianapolis (3.1 percent), Phoenix (3.2 percent) and Nashville, Tenn. (3.5 percent).

Read the full CommercialEdge report.

The post How AI is Boosting the Data Center Market appeared first on Commercial Property Executive.

The research study states those investments were more than New York and Beijing combined during the same period. The San Francisco Bay Area outperformed most other markets on venture capital, research and development investment, productivity and talent breadth.

As was the case in previous years, the other top markets for innovation and talent included Boston (third), Tokyo, London, Seoul, Singapore, Shanghai and Paris. This year, Austin, Texas, placed eighth on the Top 15 list of top-performing cities for innovation and talent. Seattle came in 10th, followed by New York at 11th and Raleigh, N.C., rounding out the ranking in 15th place.

JLL’s third edition of the report looks at how innovations continue to influence real estate location and portfolio strategies, based on the dynamics of 108 cities globally. Ranked across a range of output, funding and talent indicators, JLL identified eight groups of cities across various innovation and talent concentrations to provide perspective on the rapidly evolving global landscape. Noting the pandemic caused the most severe correction on record, the report points out there are shifting demands from innovation-focused users across the industrial, office, lab and data center sectors. But there are also opportunities for occupiers, investors and public bodies.

Continuing migration

One of the report’s key findings is that migration of innovation and talent to affordable and lifestyle-centric cities continues, leading to sustained growth in secondary and tertiary markets. In the U.S., lower-cost cities like Austin have moved into the global tier of innovation hubs and a midsized city like Raleigh has registered marked improvements in both innovation and talent.

READ ALSO: AI Is a Silver Lining for the Office Market

Another midsized city, Las Vegas, is cited as a market likely to benefit from further spillover in the coming years with the potential to develop as an innovation cluster with gains in output, particularly patents and venture capital deployment. Nashville, Tenn., is called a secondary market that has greater affordability compared to larger markets enabling a higher rate of net migration along with increasing real estate demand and price growth. Miami is considered a destination for foreign direct investment and capital deployment at lower costs, fueling inbound migration and strong demand for real estate.

JLL notes that continued migration of talent, manufacturing and economic and corporate activity has pushed other U.S. cities like Austin, San Diego and Los Angeles into what it calls the “global builders” category. The report describes “global builders” as markets defined by mature, broad talent pools with high levels of overall output aided by extensive research and educational institutional presence. They tend to have lower real estate costs than “global leaders” like San Francisco but have similar demographic factors.

Other forces

Throughout the next decade, market specialization, talent migration, sustainability goals and new technologies like AI will continue to drive commercial demand and reshape the built environment, according to the report. Injection of capital into newer technologies is driving market maturation and increasingly specialized clusters. JLL notes that generative AI has received $22.3 billion in venture capital in 2023. Adding in investments in areas such as electric mobility, batteries, green buildings and drug development, new innovation funding rose to $54.7 billion throughout 2023, more than doubling since 2020.

JLL states the geography of innovation is also being shaped by external geopolitical forces such as more aggressive trade and industrial policies that are incentivizing onshoring and increased domestic production of critical components.

The most visible impact in the U.S. has been the increase in plans for semiconductor manufacturing driven by funding from the CHIPS and Science Act. This realignment will place more emphasis on research and development as well as co-location of manufacturers with transportation and logistics nodes. JLL points to multibillion-dollar semiconductor or high-tech materials fabrication plants being built in or near metropolitan areas, particularly in the Phoenix and Columbus, Ohio, markets as examples.

Sustainability and efficiency standards also continue to drive innovation and alternative sectors will be critical in enabling many of the fastest-growing innovation geographies to cope with climate change impacts on real estate investments, including data centers. The report expects venture capital funding for green building technologies, which rose by 32 percent last year, to keep increasing.

The post Where Innovation Drives CRE Demand appeared first on Commercial Property Executive.

Completed in 2023, the Garden City, Texas, campus provides hosting agreements for blockchain mining clients, such as Marathon, under third-party arrangements. Image courtesy of Applied Digital

Applied Digital Corp. has agreed to sell a recently completed 200 MW cryptocurrency mining campus located in Garden City, Texas, to Marathon Digital Holdings, one of its customers, for a gross purchase price of roughly $97.3 million. The seller will net approximately $87.3 million from the trade, after adjustments contemplated in the agreement.

The acquisition is expected to close in the second quarter of 2024. The transaction will also release $12 million of restricted cash that Applied Digital had previously committed as collateral for the facility’s documentary credit agreements.

For Wes Cummins, Applied Digital’s chairman & CEO, the sale was motivated in part by a desire to reallocate capital to North Dakota, and to further the development of High-Performance Computing facilities there.

According to a report from Newswest 9, the Garden City campus opened in December of 2023, having been officially energized two months prior. The facilities total 125,000 square feet, and are configured for tenants in cryptocurrency mining. Upon opening, the project brought the company’s total operational capacity across its blockchain-related holdings to 480 MW. The facility’s location at 12022 Ranch Road 33 benefits from West Texas’ strong winds, which both power local free-to-use turbines and cool the facility’s equipment.

READ ALSO: Data Center Leasing Picks Up

Marathon, the facility’s new owner, currently hosts 34,200 operational miners within the space under a multi-year colocation agreement. At the moment, the firm hosts 68,240 miners in the nearby town of McCamey, its largest site. 36,450 miners are in Granbury, just outside of El Paso, Texas. At one of Applied Digital’s facilities in Ellendale, N.D., Marathon operates 56,590 miners, its second-largest site.

The next data center hotspot?

Data centers, particularly those with power intensive uses and requirements, are seeing record development and power purchase numbers around the Southwest and Midwest, in part due to the regions’ combination of cheap land and energy, as well as the prevalence of cryptocurrency mining and artificial intelligence. In February, Edged Energy signed on to build four new data centers totaling north of 300 MW in capacity, three of which are outside Chicago, Phoenix and Kansas City.

In the largest deal of the year, Meta Platforms announced the construction of an $800 million, 700,000-square-foot campus in Jeffersonville, Ind.

The post Applied Digital Seals $97M Crypto Mining Sale appeared first on Commercial Property Executive.

Blackstone Credit & Insurance, an entity of private equity giant Blackstone, has provided an initial $600 million senior secured credit facility to Aligned Data Centers for the development of SLC-03, the technology infrastructure company’s newest and largest data center near Salt Lake City.

The credit facility is the first financing deal as part of a new strategic partnership between BXCI and Aligned. It is committed by insurance accounts managed by BXCI’s Infrastructure & Asset Based Credit Group.

READ ALSO: AI Is Changing the Game for Data Centers: JLL

Located at 3333 W 9000 S in West Jordan, Utah, SLC-03 is a two-story, 80 MW build-to-suit data center development, the fourth on Aligned’s hyperscale campus in the Salt Lake City metro area. The facility will include the firm’s patented Delta Cube cooling technology featuring a waterless heat rejection system.

Aligned announced plans to develop SLC-03 for an unidentified customer in June 2022. Nearly a year earlier in August, the firm had acquired the site and started work on SLC-04, another multi-megawatt build-to-suit facility at the West Jordan campus. Other on-site facilities include the 300,000-square-foot SLC-01 and the 240,000-square-foot SLC-02, that was completed in March 2021.

Aligned’s recent operations include its first foray into the Ohio market. In September 2023, the firm acquired a 129-acre land parcel in Sandusky, formerly occupied by General Motors, for development of a new data center campus.

Including Ohio and Utah, the company now operates or is developing facilities in eight states—Texas, Illinois, Oregon, Arizona, Maryland and Virginia. Aligned also has one location in Canada and four in Latin America.

Blackstone’s data center deals

Blackstone has increasingly targeted data center investments in recent years. Late last year, Digital Realty formed a joint venture with funds controlled by Blackstone for the development of four new data centers in Northern Virginia, Paris and Frankfurt. The partnership expects to invest at least $7 billion and develop up to 10 data centers.

In June 2021, Blackstone acquired QTS Realty Trust for $10 billion. Last July, the firm announced it sold off other assets to fund an $8 billion commitment to build new data centers through QTS.

The post Blackstone Provides $600M Credit Facility to Aligned Data Centers appeared first on Commercial Property Executive.

Amazon Web Services has expanded its Pennsylvania presence with a nuclear-powered facility. The global cloud provider paid $650 million for Talen Energy’s 1,200-acre Cumulus data center campus, located next to the Susquehanna Steam Electric Station, a nuclear power plant in Berwick, Penn. AWS plans to expand the campus to 960 megawatts. Talen will supply electricity via a 10-year Power Purchase Agreement.

The deal includes all land, power infrastructure, powered shell and intangibles on the campus. The seller will obtain $350 million at close, with another $300 million in escrow until some development milestones are reached later this year.

READ ALSO: Will the Data Center Industry Grow More in ’24?

Talen will use a portion of the gross proceeds to buy out the last 5 percent equity stake in its subsidiary, Cumulus Digital—the entity developing the data center campus. After paying off debt, interest, transaction fees, along with other expenditures, the energy company expects to generate net proceeds of roughly $361 million once the deal is complete.

A carbon-free data center campus

The data center campus currently includes a 48-megawatt, 300,000-square-foot powered shell which Cumulus completed last year. This facility, along with future expansions, is directly connected to Susquehanna’s power stations. The nuclear plant is the sixth largest in the U.S., producing 2.5 gigawatts of carbon-free energy.

As part of its contractual commitments, AWS will ramp up deployments in 120-megawatt increments over several years. It also has a one-time option to cap these commitments at 480 megawatts. A separate agreement states that Talen will also receive additional revenue from AWS, related to sales of carbon-free energy.

AI, HPC amplify challenges to sourcing clean power

Data centers have become more efficient in using power over the last decade. Although workloads have more than doubled, power usage has remained mostly flat since 2015, JLL research shows. However, with the growth in scale from high-performance computing and AI workloads, securing power has become the number one issue for data center developers and operators.

And the added layer of transitioning to sustainable energy makes everything even more challenging. The same research shows that the U.S. requires an additional investment of $2 trillion to upgrade its grid and grow the renewable energy supply. For the data center industry, this translates into the continued growth of secondary and tertiary markets, where power procurement timelines are more feasible.

Large players like Amazon are able to make huge commitments—such as the $7.4 billion investment announced last year in Ohio—to secure the power they need over the next decade. But other major companies are intensifying their investments into the sector as well. Some of the largest deals of last year included Blackstone’s $7 billion venture with Digital Realty, Vantage’s $6.4 billion equity deal, and EdgeCore’s $1.9 billion in green financing.

The post Amazon Goes Nuclear in Pennsylvania appeared first on Commercial Property Executive.

Mitsubishi Corp. has entered the U.S. data center market. The Japanese company formed a joint venture with Austin-based REIT Digital Realty to purchase a 65 percent equity share—for an initial $200 million—in two data centers that are under construction in the Dallas-Fort Worth metro. Wells Fargo Securities served as financial advisor for Digital Realty.

Each partner will fund the pro rata share on the remaining $100 million costs associated with the completion of the development’s first phase. This is slated to come online in late 2024 and provide an initial 16 megawatts of IT capacity.

Digital Realty will maintain the remaining 35 percent of interest and will handle the venture’s day-to-day operations, for which it will receive customary fees.

READ ALSO: AI Is Changing the Game for Data Centers: JLL

The developer broke ground on the two facilities in 2022, with a budget of $400 million for Phase One. Both upcoming data centers are pre-leased to an S&P 100 customer, which retains the possibility to expand capacity up to 48 megawatts through the lease term—bringing development costs up to $800 million.

According to CommercialEdge data, Digital Realty has two data centers under construction in the Metroplex, at 2501 Edmonds Lane in Lewisville and 1505 Ferris Road in Garland. The company registered both projects with the Texas Department of Licensing and Regulation in 2022 and each has an associated estimated cost of $54.9 million. The developments measure 182,969 and 181,200 square feet, respectively.

Commercial Property Executive reached out to the developer to find out if these are indeed the properties involved in the deal with Mitsubishi Corp. but did not receive an immediate response as of time of publishing.

A series of high-value ventures

Last year, Digital Realty entered several similar partnerships. Most notably, it formed a $7 billion venture with Blackstone for the development of four new data centers in Northern Virginia, Paris and Frankfurt. In August, it sold an 80 percent stake in three data centers to TPG Real Estate Partners for $1.5 billion.

In the fourth quarter of last year, the company had $1.4 billion in revenues, up 11 percent year-over-year but down 2 percent quarter-over-quarter, according to its latest financial report.

The REIT currently has 13 active data centers in the Metroplex area, amounting to more than 2.8 million square feet. The 168-acre Convergence campus in Lewisville is the largest, comprising 829,372 square feet across 10 buildings connected to a central utility plant.

Dallas-Fort Worth market still solid, but land is scarce

Dallas-Fort Worth had 331.9 megawatts under construction and an additional 2.2 gigawatts in the planning stages at the end of last year, according to a recent JLL report.

Demand in the Metroplex remained high through the second half of last year, but securing suitable space for development has become a serious hurdle, the same research shows. Dallas-Fort Worth recorded a total of 593 megawatts of absorption last year, as users were actively preleasing capacity.

Consequently, both land prices and deployment densities are rising in the market. This hasn’t stopped developers from starting projects, such as Skybox Datacenters’ 300-megawatt campus, which broke ground in November last year.

The post Digital Realty, Mitsubishi Form Data Center JV appeared first on Commercial Property Executive.

As we consume more and more online bandwidth, the growth of data center demand is accelerating across the U.S., with developers, providers and utilities racing to keep up and provide the space—and more importantly, power—needed to operate these facilities.

JLL’s latest report on data centers shows that strong demand, combined with a lack of power capacity, led to extremely limited availability and increased preleasing—now often years ahead of the delivery of new product.

And while primary markets such as Northern Virginia are still seeing record transactions, development is also spreading to a rising number of secondary and tertiary areas.

When AI makes the difference in data center demand

The explosive growth in the use of AI applications and Large Language Models the likes of ChatGPT, which require tremendous amounts of power, often as much as 300 to 500 MW, is a big factor in data center demand. To put it into perspective, JLL noted that ChatGPT had more than 100 million monthly users in January 2023. By November, it had the same amount of active users weekly. With hundreds of millions of daily queries, the LLM uses as much power as 33,000 households.

READ ALSO: AI Drives Explosive Growth in Data Center Demand

“We’re seeing AI applications being embraced not only by the big tech companies like Microsoft, Google, Facebook etc., it’s getting down to the enterprise level where Fortune 500 companies want to utilize AI applications and so they’re getting into the game as well. They’re going to have to put those H100 servers in their own data centers or they’re going to have to outsource to somebody else,” said Curt Holcomb, executive vice president, data center brokerage, JLL.

Holcomb said his company started to see increasing requests for more AI-driven capacity in large data centers about a year ago. The increased demand was significant enough to create almost zero vacancy in many markets, he told Commercial Property Executive.

New York and New Jersey both recorded increased demand due to significant AI deployments in the second half of 2023. More than 15 MW was preleased in Orangeburg, N.Y., a New York City suburb, and more than 35 MW was deployed in New Jersey.

Data center real estate is changing in many ways

JLL also noted that cloud and hyperscale users are driving demand, particularly in the larger markets where they dominate, making it more difficult for smaller enterprise users to find colocation space and power. As a result, some enterprise users are evaluating a shift to the cloud due to rising costs, latency and information security concerns, to a “distributed cloud” environment or outsourcing enterprise data center operations.

Holcomb said the Northern Virginia market “still gets an inordinate amount of absorption and demand because it’s got the infrastructure and they’re able to offer that capacity.”

While much of his work involves helping developers and colocation operators find sites, Holcomb said lately they are focusing less on the land and more on the power capacity. For areas that don’t have a robust transmission infrastructure, particularly in more rural areas, they have to consider how long it will take for the utility to deliver power to a specific site.

“Five years ago, we would look for maybe 30 to 50 acres with the ability to bring in 20 to 30 megawatts to the site,” he told CPE. “In a typical selection process now, somebody is looking for 100 to 300 acres with 500 megawatts or more (of power capacity).”

To combat issues of limited power availability from the public grid, some data center operators are exploring microgrids, small-scale localized power systems that can integrate renewable energy. Others are considering biofuel-based backup power and small nuclear reactors for data center use.

In markets where space is tight, some data center providers are developing multi-story data centers or expanding existing facilities. Upgrades to existing power infrastructure or on-site power generation can also add power capacity.

Hot data center markets in 2023, ’24

In the second half of 2023, primary data center markets signed 3.4 GW in transactions, bringing the full year total to a record 4.3 GW. Of that, Northern Virginia led with 1.6 GW, while 884 MW was preleased for space not yet powered. Phoenix followed, with 784 MW of new capacity signed. Holcomb said he expects Phoenix, Dallas-Fort Worth, Chicago and Northern Virginia will all continue to grow at significant rates over the next 5 years.

Secondary markets added 124 MW of absorption in the second half of 2023 and 554 MW for the full year. The Northwest led all secondary markets, with 258 MW absorbed. The Hillsboro, Ore., submarket accounted for 62 percent of that. Holcomb noted the Hillsboro area developed a vibrant colocation market that he expects will continue to grow.

While primary markets remain strong, lack of availability is leading users to secondary markets, which now comprise almost 20 percent of capacity under construction. The report notes almost all markets are seeing an uptick in construction. Salt Lake City is recording the fastest construction acceleration and is on track to more than double its existing capacity. But Holcomb noted that Salt Lake City now has power constraints.

Atlanta is another growing secondary market, where absorption in the first half of 2023 was 120 MW and 568 MW in the latter half, for a total of 688 MW. The report describes the demand in the Atlanta market as “unyielding,” adding colocation providers are “working feverishly to secure land sites” for new product and future supply planned for the next 3 to 5 years is being preleased. Hyperscalers are preleasing from colocation providers at a record pace, more than quadrupling during the first half of 2023. Enterprise users are taking small pockets of available space and power.

Tertiary markets that are seeing increased hyperscale and colocation activity include Minneapolis; Reno, Nev.; Columbus, Ohio; Madison County, Minn.; and Indiana.

The post AI Is Changing the Game for Data Centers: JLL appeared first on Commercial Property Executive.

Edged Energy, an Endeavour subsidiary focusing on carbon-neutral data center development, has launched in the U.S. with four data centers totaling more than 300 MW of critical capacity.

Designed for high-density AI workloads, all four facilities will feature advanced waterless cooling and ultra-efficient energy systems. They will have a Power Usage Effectiveness (PUE) averaging 1.15 portfolio-wide.

The first phase of Edged’s U.S. expansion comprises:

•  a 168 MW, 70-acre campus in Atlanta with three buildings;

•  a 96 MW, three-building campus in Aurora, Ill., near Chicago;

•  a 36 MW, two-building campus in Mesa, Ariz., in metro Phoenix;

•  a 24 MW, single building data center in Kansas City.

Edged intends to break ground on several more sites in major U.S. urban markets in the coming months.

READ ALSO: Will the Data Center Industry Grow More in ’24?

All of the company’s data centers feature its proprietary ThermalWorks waterless cooling system, designed to uphold the intense demands of generative AI and advanced computing. The modular system supports densities of up to 70 kW per rack with air cooling and 200 kW per rack with plug-and-play liquid cooling integration. 

At a time of growing water scarcity, these new facilities are expected to save more than 1.2 billion gallons of water annually, compared to conventional data centers. In a prepared statement, Edged CEO Bryant Farland said sustainability is at the core of the firm’s platform so their data centers are optimized for energy efficiency and water conservation.

Global player

Edged operates a network of four carbon-neutral, waterless data centers in Iberia: in Madrid-Getafe, Barcelona and Bilbao-Arasur in Spain, as well as one in Lisbon. The firm has nearly a dozen new data centers operating or under construction across Europe and North America and a gigawatt-scale project pipeline.

A 2024 outlook from CBRE ranks two of Edged’s initial U.S. metros among its “Markets to Watch” in the data center sector. Atlanta is praised for its low cost of power and ample land availability, and Chicago for its hyperscale interest and excellent connectivity.

The post Edged Energy Makes US Data Center Debut With 4 Projects appeared first on Commercial Property Executive.

Master-planned data center parks developer Tract has acquired 517 acres within the Tahoe-Reno Industrial Center in Storey County, Nev.

In October last year, the Denver-based company had acquired more than 2,200 acres inside TRIC, in two areas referred to as the Peru Shelf and South Valley. This latest purchase is adjacent to 686 acres previously acquired along Peru Drive.

Tract acquired the new parcel through an operating entity. The site includes existing improvements such as a pre-graded section of a planned initial pad of roughly 120 acres. Water and sewer infrastructure are already adjacent to the lot. The company noted that it is zoned for a wide range of pre-approved uses, including data centers.

READ ALSO: Will the Data Center Industry Grow More in ’24?

Last year, Tract announced plans to develop data centers totaling up to 2 gigawatts of power. To support this, the company entered into an agreement with NV Energy to provide energy to the sites, starting in 2026.

Last month, Tract also entered a partnership with Silicon Ranch—a solar power developer—to support its projects in Nevada and Utah with renewable energy.

The developer described TRIC as ‘the center of an emerging data center cluster’ where wholesale data center operators and self-build hyperscale cloud providers like Microsoft have recently joined the Reno ecosystem. The area reportedly benefits from proximity to Silicon Valley, yet with lower power costs, lower environmental risks and access to land.

Tract CEO Grant van Rooyen stated in prepared remarks that the acquisition ‘represents a bolt-on that can stand alone as a data center campus or create additional scale for the Peru Shelf we have previously announced.’

The company did not respond to Commercial Property Executive‘s request for additional information.

A search for power

The expansion of AI looks to be ‘the biggest transformation in the data center industry since the sector burst onto the scene,’ according to a January report from JLL. The highly specialized equipment needed to support AI densities, particularly liquid cooling, will transform traditional facility design. Data center providers are rapidly changing designs to support these new requirements.

A key factor here is power, and regional power limitations are one factor behind a shortage of data center colocation supply, JLL reports.

Several other data center providers and developers have chosen to expand or to build data centers at the master-planned TRIC:

• PowerHouse Data Centers announced that it had closed on the site for PowerHouse Reno, the company’s planned 900,000-square-foot, $400 million powered shell data center, to be developed in a joint venture with Harrison Street
• EdgeCore broke ground on a 1.5 million-square-foot campus and completion is expected in late 2025, delivering an initial 216 megawatts
• Novva Data Centers also expanded its footprint at TRIC in May last year—the developer invested another $500 million in its second Nevada facility

As hyperscalers pursue low-carbon strategies to overcome their power issues, they’re working to broaden their geographical footprints into secondary and tertiary markets—not just Reno, but also Atlanta, Salt Lake City, Denver, Columbus, Ohio, and Charlotte, N.C., JLL stated.

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Meta Platforms is set to expand its data center footprint in the Midwest with the construction of an $800 million, 700,000-square-foot campus in Jeffersonville, Ind., officials said on Thursday. Construction will begin later this month, and the facilities are expected to open in 2026.

The parent of Facebook, Instagram and other platforms is planning the Southern Indiana facility as part of its strategy to increase its data storage capabilities.

Local partners

The campus will be located inside the River Ridge Commerce Center, a 6,000-acre commercial district in Jeffersonville that includes office and industrial facilities targeting users in the aerospace, life science, manufacturing, logistics and technology sectors.

Turner Construction Co. is serving as the project’s contractor, while Meta is partnering locally with the Indiana Economic Development Corp., One Southern Indiana Chamber & Economic Development, as well as Duke Energy.

The project incentive package features an $800 million, 35-year performance-based sales tax exemption, with additional five-year exemptions possible for each subsequent matching investment. The River Ridge Development Authority and the city of Jeffersonville have offered further incentives.

READ ALSO: Will the Data Center Industry Grow More in ’24?

At the peak of construction, the project is expected to employ more than 1,250 workers and create 100 permanent jobs. Like all of Meta’s data centers, the facility will be powered entirely by renewable energy, and will be a candidate for LEED Gold certification. The campus will host a chapter of the company’s Data Center Community Action Grants program, which will aim to improve local STEM education.

With direct access to the Interstate 265, the River Ridge Commerce Center offers both quick transportation for employees around the facility, as well as access to Louisville, located nine miles to the south. For industrial tenants seeking to reduce transportation times and costs, the facility lies within a day’s drive of many of the Midwestern and Southeastern U.S.’s largest cities.

Midwestern moves

Currently, Meta owns and operates 17 data centers around the U.S., five of them located in the Midwest. Also in the works is an $800 million, 1 million-square-foot hyperscale facility located at the Golden Plains Technology Park in Kansas City, Mo. The facility is expected to be operational later this year, according to a September 2023 report from Fox4 Kansas City.

The Hoosier State is becoming a magnet for tech and logistics-related commercial property investment and development, attracting north of $28.7 billion from businesses nationwide, according to the governor’s office. On the leasing front, a recent highlight is Adidas’ June 2023 renewal of a 600,000-square-foot industrial lease in Indianapolis.

The post Meta Reveals Pick for $800M Project Site appeared first on Commercial Property Executive.

Less than one week after closing on property for its first Reno, Nev., site, PowerHouse Data Centers has completed the purchase of 145 acres along the I-95 corridor in Spotsylvania, Va., for an 800-MW data center campus. PowerHouse is developing the project in a joint venture with Harrison Street.

In addition to closing on sites for the PowerHouse 95 and PowerHouse Reno data center campuses, the company has four developments underway in northern Virginia totaling more than 700 MW. Last week, the company closed on the site of a planned $400 million, three-building, 900,000-square-foot powered shell data center campus in Reno. It will be developed within the Tahoe Reno Industrial Center, located in a fast-growing tech hub serving the Northern California region.

PowerHouse 95 will serve the data-intensive needs of hyperscale users in northern Virginia, the largest data center market in the world. The campus will have three 300 MW substations, with the first already under development and expected to provide 150 MW by October 2025. When it delivers, the first substation will provide enough power to construct up to eight or more high-density data centers. PowerHouse and Harrison Street will have the flexibility to develop between four to eight powered shells and two additional substations, maximizing optionality for hyperscale tenants.

READ ALSO: Will the Data Center Industry Grow More in ’24?

A PowerHouse representative told Commercial Property Executive the remaining power delivery timeframes will be dictated by future end client requirements and coordination with the local electric utility.

The site already has two existing substations that will imminently offer access to power, which is expected to offer a competitive advantage because it will enable PowerHouse to accelerate its ability to address customers’ increasing data demands in the region.

Doug Fleit, co-founder and CEO of AREP and PowerHouse, said in a prepared statement this provides the ‘speed to market’ that hyperscale users are demanding and will provide low latency data transport options back to their campuses and peering sites in Ashburn, Va.

Growing the Platform

Michael Hochanadel, managing director of Harrison Street, said in prepared remarks that PowerHouse 95 demonstrates the ability of the JV partners to identify high-quality solutions for hyperscale clients. He said that Harrison Street’s ongoing partnership with PowerHouse continues to accelerate the development of highly-sought after data centers to address increasing demand driven by high-powered computer, artificial intelligence and other advancements. According to Hochanadel, the JV expects to continue expanding the PowerHouse platform throughout Northern Virginia and other key regions in the United States.

Early last year, PowerHouse topped out ABX-1, its first data center project in the Northern Virginia market. The powered shell totals 265,850 square feet and will initially provide 60 MW. Tenants were expected to move into the Ashburn, Va., site during the latter part of 2023.

The Ashburn campus is part of the company’s plan to construct 2.1 million square feet of data center space in Northern Virginia. AREP and Harrison Street announced the joint venture last year, kicking it off with a $1 billion investment, including two additional facilities to be in Arcola, Va., with a maximum capacity of 120 megawatts across 364,100 square feet of data halls. The buildings are set to come online in 2025 and 2026.

The post PowerHouse Eyes 800 MW Data Center in NoVa appeared first on Commercial Property Executive.

The Reno campus will be developed within the Tahoe Reno Industrial Center, in a region that’s evolving into one of the nation’s fastest-growing tech hubs as land and power have become challenging to secure in Northern California, according to PowerHouse.

The developer adds that the Reno region offers access to low-cost renewable energy, a qualified workforce, competitive tax rates and abatements, and a business-friendly environment.

READ ALSO: Will the Data Center Industry Grow More in ’24?

In a prepared statement, Doug Fleit, co-founder & CEO of AREP and PowerHouse, cited the broad-based growth of AI as a driver of hyperscale demand.

AI behind the wheel

PowerHouse currently has four developments underway in Northern Virginia totaling more than 700 MW.

Last March, the developer topped out ABX-1, its first data center project in this market. The powered shell totals 265,850 square feet and will initially provide 60 MW. The first occupants were expected in July, with final completion scheduled for this past October.

Nationally, AI seems to be steadily transforming the data center sector, according to a 2024 outlook from CBRE.

“As AI becomes more prevalent, there will be an increased need for high-bandwidth network connections to facilitate higher data transfer rates,” CBRE reports. “Major cloud-service providers are becoming more interested in less-expensive rural areas to provide their clients with AI training solutions, although many of these sites require new fiber connectivity. Edge data centers will also play an important role in 2024 due to edge computing reducing latency and enabling AI systems to process data closer to end-users or applications.”

As a result of this, strong demand versus limited supply, and other factors in the sector, CBRE said, data center prices continue to rise.

After projecting a 16 percent year-over-year pricing increase for 250kw to 500kw requirements in 2023, CBRE expects a further 10 percent to 15 percent pricing increase this year.

The post PowerHouse Secures Site for $400M Data Center Campus appeared first on Commercial Property Executive.

Located about 20 miles northwest of Philadelphia in East Whiteland Township, Pa., the site was acquired by GFLC and 1547 in 2022. The development firm had previously received the local authorities’ approval to construct two data centers of about 1 million square feet each. An adjacent property is available for the development of data center buildings totaling up to 5 million square feet.

READ ALSO: Will the Data Center Industry Grow More in ’24?

Adjacent to the Planebrook substation, the Chester County campus has an initial commitment of 290 MW of power from a local provider, including access to carbon-free power capabilities that will be available by 2025-2026. The power provision is critical to address the increasing requirements of hyperscale companies and diverse technology-driven enterprises as artificial intelligence, video streaming and other cutting-edge technologies and applications place greater demands on data center infrastructure.

Other green energy solutions are to include rooftop solar with potential generation of up to 7 MW of capacity scalable to 25 MW. In addition, 1547 is committed to a sustainable reforesting project and plans to plant 4,000 new trees at the Chester County site.

Previously the location of Foote Mineral Co.’s Frazer facility, the parcel is on the corner of Valley Creek Boulevard and Swedesford Road. The property has access to Tier 1 carriers such as Arelion, Lumen and Windstream.

Incentives outlined

John Bonczek, chief revenue officer for 1547, said in a prepared statement financial incentives offered by Chester County are among the best available for large-scale computer infrastructure deployments. The developers, operators and future tenants will also benefit from state sales tax exemption on data center developments that includes all construction equipment, materials, data center furnishings, fit-out and IT equipment.

Matawan, N.J.,-based 1547 is a developer, operator and owner of highly-interconnected, customer-designed data centers with more than 1.25 million square feet of data center space under management in the U.S. and Europe. The company’s portfolio includes carrier hotels and core connectivity hubs designed to deliver mission-critical solutions. Its flagship data center in Orangeburg, N.Y., is home to Fortune 100 companies and large hyperscalers attracted to the space, power and proximity of connectivity to facilities in Manhattan.

The post 2 MSF Philly Data Center Project Moves Forward appeared first on Commercial Property Executive.

More funding is needed for the support of AI applications in the data center sector. Vantage Data Centers has secured a $6.4 billion round of equity from key investors DigitalBridge and Silver Lake. The provider plans to leverage its sizeable land bank and pour about $30 billion into future developments across North America and EMEA markets.

This new funding is incremental to another recently announced €1.5 billion (about $1.6 billion) investment from AustralianSuper in Vantage’s EMEA operations, bringing the total to roughly $8 billion. These transactions are expected to close in the first quarter.

Vantage will use the funds to complement its expansion strategy. The firm will use its 25 sites across North America and EMEA to deliver roughly 3 GW of data center capacity. The provider will target hyperscale projects, including data centers purpose-built for AI and large-scale cloud deployments.

A new generation of data centers

In our recent in-depth look at the future of data centers, Vantage Senior Vice President Steve Conner pointed out that rack densities for AI applications can be five times higher than traditional cloud computing. This puts a strain on cooling requirements, leading to significantly higher development costs.

Vantage currently has 32 hyperscale campuses globally, including some under development. In the U.S., the provider is present in three primary markets—Northern Virginia, Silicon Valley and Phoenix—and it also recently completed its 86 MW campus in Quincy, Wash.

The AI revolution will continue to attract investors old and new to the data center sector, as providers and developers will need more and more cash to fund these expensive facilities. Despite the current inflation environment, debt markets also remain open to the industry.

A few other massive investments were announced recently, including Blackstone and Digital Realty’s $7 billion joint venture. In another deal, EdgeCore Digital Infrastructure obtained $1.9 billion for its Phoenix campus, which marked the company’s first green loan.

The post Vantage Lands $6.4B Equity Infusion appeared first on Commercial Property Executive.

EdgeCore data center building in Mesa, Ariz. Image courtesy of EdgeCore Digital Infrastructure

EdgeCore Digital Infrastructure, a Denver-based data center developer, owner and operator, has obtained $1.9 billion in green financing to fund further development at its Mesa, Ariz., campus.

The financing package comprises a limited-recourse senior secured term loan, a revolving senior secured letter of credit facility and an accordion feature. A consortium of coordinating lead arrangers, including MUFG, TD Securities, ING Capital LLC, Scotia Bank and Santander, led the transaction; MUFG acted as administrative agent. Davis Polk Watson served as the borrower’s counsel and Milbank was the underwriters’ counsel.

READ ALSO: Will the Data Center Industry Grow More in ’24?

The deal was conducted in conjunction with EdgeCore’s owner, Partners Group, which acquired the firm in November 2022. At the time, Partners was planning to invest up to $1.2 billion to fund the acquisition and build-out of existing and future data center sites.

EdgeCore used Partners Group’s initial capital commitment throughout 2023 to expand and begin development of data center campuses in Santa Clara, Calif., in January 2023; Ashburn, Va., in March; Mesa in April and Reno, Nev., in August. The Reno campus at the Tahoe Reno Industrial Center is EdgeCore’s first data center in that region.

A massive data center campus near Phoenix

At full build-out, the Mesa campus will have 3.1 million square feet of space and support a minimum of 450 MW of critical load. The LEED-designed and water-neutral complex currently has one operational data center and two additional data centers underway totaling 206 MW of critical load capacity.

Carrying the address 3856 S. Everton Terrace, the campus is taking shape on 40 acres located in the Mesa Elliot Technology Corridor, near Apple’s 1.3 million-square-foot data center. Downtown Phoenix is some 32 miles northwest.

Green loan features

ING Capital was the sole Green Loan Structuring Agent for the current financing. Fentress Boyse, member of Management, Private Infrastructure Americas at Partners Group, said in a prepared statement this deal marks the largest green loan obtained by one of the firm’s companies to date.

Julie Brewer, senior vice president of finance at EdgeCore Digital Infrastructure, added in prepared remarks the company is focused solely on designing scalable data center campuses to meet the density requirements of hyperscalers. Brewer said campuses like the one in Mesa are designed with sustainable construction, operations and business practices in mind, making them eligible for debt financing from a green loan.

For example, the temperature regulation at the Mesa campus uses an air-cooled design with an ultra-efficient closed-loop chilled water system that will allow the company to achieve a benchmark water usage effectiveness rating of nearly zero and a power usage effectiveness rating far below the industry average of approximately 1.50.

Those energy efficiency and sustainable water management features enabled the financing to be structured as a green loan in alignment with the latest Green Loan Principles as published by the Loan Market Association, Asia Pacific Loan Market Association and Loan Syndication & Trading Association.

The post EdgeCore Secures $1.9B for Phoenix Data Center Campus appeared first on Commercial Property Executive.

Richard Barkham, Global Chief Economist & Head of Global and Americas Research, CBRE. Image courtesy of CBRE

CBRE expects an economic slowdown in the U.S. next year that will impact commercial real estate with bank lending remaining tight throughout 2024, investment volume decreasing 5 percent, cap rates expanding and property values declining.

But the U.S. may be able to avoid a recession and interest rates should be reduced later in the year as activity picks up in the second half of 2024, according to the firm’s 2024 U.S. real estate outlook.

Property types with relatively strong fundamentals, including demand, vacancy and rent growth, like industrial, retail, multifamily and data centers will be most favored by investors in 2024, according to CBRE.

Richard Barkham, CBRE global chief economist & global head of research, said in prepared remarks there is still some more pain ahead for the commercial real estate industry in 2024, including overall investment volumes remaining down for the year. But he expects an upturn by the second half and overall leasing activity to pick up as well. He notes stabilization and the early stages of recovery are also not far off.

North America dry powder by strategy. Chart courtesy of CBRE

With inflation easing, the Federal Reserve is expected to begin reducing short-term interest rates in 2024, possibly to around 4.25 percent by the end of the year and to 3.5 percent in 2025.

There should be buying opportunities in the first half of 2024, especially for all-cash buyers like sovereign wealth funds, pension funds and endowments. CBRE expects the lowest pricing for assets will occur in the first two quarters.

The report notes increasing cap rates, which have risen by about 150 basis points between early 2022 and late 2023 depending on the market and asset type, imply a 20 percent decline in values for most property types. For office, the increase was higher, rising by at least 200 basis points.

“We think cap rates will expand by another 25 to 50 basis points in 2024, with a corresponding 5 percent to 15 percent decrease in values,” the report states.

CBRE expects real estate values for most property types will likely not stabilize before mid-2024.

Historical & forecast cap rates. Chart courtesy of CBRE

Office vacancies to peak

The outlook expects another tough year ahead for the office market with office vacancy peaking at nearly 20 percent in 2024, up from 18.4 in the third quarter of 2023 and 12.1 percent at the end of 2019.

CBRE notes a slowing economy in the first part of 2024 and increasing acceptance of hybrid working arrangements will continue to limit office demand next year. The 2023 U.S. Office Occupier Sentiment Survey found more than half of the respondents planned to further reduce their office space in 2024.

Companies looking to lease less than 20,000 square feet will account for most of the leasing activity, according to CBRE. Leasing activity should rise by 5 percent in 2024, however that is still 20 to 25 percent lower than pre-pandemic levels.

READ ALSO: How Incentives Boost Office Conversions

Meanwhile, the flight-to-quality trend should continue with occupiers seeking space in newer, prime office properties with the best amenities. But office construction levels will be at their lowest levels since 2024, which could result in a shortage of that sought-after Class A space later in the year. CBRE forecasts that average prime office asking rent will increase by as much as 3 percent.

On the investment side, the higher-for-longer outlook for interest rates will cause some owners of Class B and C office assets to sell due to further erosion in values. Many of those older buildings that lack modern amenities will continue to struggle to attract tenants, so a higher percentage of older office assets are likely to be converted to other uses. While office conversions can be challenging, the report notes the federal government is providing grants, low-interest loans and tax incentives and local governments are also offering incentives.

Not all office markets are suffering, and the outlook shines a light on several active cities in the U.S. In Nashville, Tenn., where absorption and rents are up, demand for new office space is expected to remain strong. Miami is seeing one of the highest rent increases in the country and the vacancy rate is dropping as new-to-the market tenants are keeping the market healthy. Las Vegas has seen an uptick in leasing activity and strong preleasing at speculative projects, putting the market in a strong position heading into 2024.

Industrial sector slowdown

The industrial sector should see net absorption similar to 2023 levels and rent growth moderating to 8 percent. Construction deliveries are tapering off and expected to continue to slow down due to economic uncertainty, tight lending conditions and oversupply in some markets.

READ ALSO: Property Management Success: How AI Boosts Industrial

Vacancy is expected to hit 5 percent by mid-2024, up from 4.2 percent in the third quarter of 2023 but decrease later in the year due to the decline in new construction. Looking ahead, CBRE is forecasting a 7.5 percent increase in U.S. industrial production over the next five years as more occupiers improve their supply chains by adding more import locations and onshoring or nearshoring of manufacturing operations. Markets to watch include Austin and San Antonio in Texas; Nashville; Salt Lake City and Central Florida.

Retail’s declining availability

The retail sector is also facing a lack of new construction. That will contribute to retail availability rates dropping by 20 basis points next year to 4.6 percent. Asking rent growth is expected to drop below 2 percent for most of 2024 but go above 2 percent by the fourth quarter.

READ ALSO: Mixed Shopping Cart for Retail

Open-air suburban retail centers will see demand grow faster than other retail formats and neighborhood, community and strip centers will have stable occupancy throughout the year. Look for traditional mall-based retailers to seek other new formats outside the malls for expansion. Texas markets are expected to see more luxury brands. Other markets to watch include Orlando, Fla.; Charlotte, N.C.; Denver; San Francisco and Orange County, Calif.

AI to fuel increased data center demand

The data center market is seeing growth, often driven by advances in cloud-based solutions, artificial intelligence and other new applications and technologies. CBRE notes demand will continue to be higher than supply and construction in major markets will exceed 3,000 MW in 2024, up from the company’s 2023 estimate of 2.500 MW. Markets to watch include Austin; San Antonio and Omaha, Neb.

The post What to Expect for CRE in 2024 appeared first on Commercial Property Executive.

Ryan Mallory believes that in 2024, forward-thinking leaders will diversify their footprints into new, regional markets, aiming to circumvent supply chain constraints of primary metros. Image courtesy of Flexential

Data centers have racked up another spectacular year. Despite a slowing economy and a business environment marked by uncertainty, the industry has seen strong fundamentals, with growth in primary markets continuing at a record pace. Demand is only increasing, fueled by the rapid proliferation of AI technology.

Several landmark moves made waves in 2023, and some of them will likely have a huge impact on the sector going forward. For example, Blackstone‘s recent $7 billion joint venture with Digital Realty is set to deploy 500 megawatts across three primary markets over the next few years, while Amazon Web Services‘ plans to invest $7.8 billion in Central Ohio is set to bring more data centers to the area over the next six years.

READ ALSO: How the Cost of Building Is Shaping Up for 2024

But despite developers keeping a strong pace of new projects throughout both primary and secondary markets, economic hurdles and other types of challenges remain on several key levels.

Large deployments are no longer overwhelmingly the realm of primary markets, as some of those have become saturated and constrained by either a lack of developable land or limited power capacity. This, in turn, has generated premium prices.

According to Cushman & Wakefield Head of Alternative Insights Jacob Albers, vacancy rates in all primary markets in North America are below 5 percent, with a few even falling below 1 percent—such as Northern Virginia. These record low figures will continue to push lease pricing, pressuring operators to examine secondary markets and outlying areas of established ones.

Power availability will drive growth

Jacob Albers thinks that data centers will continue to remain a niche sector with a high barrier to entry, due to the complexities of developing these facilities. Image courtesy of Cushman & Wakefield

Colton Brown, vice president of strategy and development at Aligned Data Centers, believes that market tier designations are becoming increasingly irrelevant, as there are individual campuses now that can deliver as much capacity as multiple Tier 2 markets combined. What will drive growth in these markets is power availability. As some primary data center areas, including Silicon Valley and Loudoun County, Va., continue to have issues with power, developers and operators will move on to new markets where these concerns don’t yet exist.

“Notably, it is a growing belief that most AI learning facilities will not have stringent latency requirements, enabling data center operators to evaluate sites hundreds of miles away from traditional cloud regions,” Albers told Commercial Property Executive. 

Tertiary markets and rural areas will likely see an increase in announcements for hyperscale builds. Record-setting power purchase agreements have been signed in midwestern and southern markets, which will probably continue through next year in other areas as well.

“Forward-thinking leaders will diversify their data center footprint into new, regional markets, aiming to further circumvent supply chain constraints and overcome the rising operational costs in Tier 1 cities,” Flexential COO Ryan Mallory expects.

Markets to watch in 2024 include Columbus, Ohio; Kansas City, Mo.; Omaha, Neb., Des Moines, Iowa; Reno, Nev., along with metros in Arizona, Tennessee, The Carolinas and Georgia. What these regions have in common are growing and upcoming renewable energy plants. Power will be a crucial factor in 2024 and beyond.

EdgeCore’s upcoming 1.5 million-square-foot, 216-megawatt campus in Reno, Nev., is a project for which the developer secured power agreements with utility provider NV Energy. EdgeCore is targeting LEED certification for the campus. Rendering courtesy of EdgeCore Digital Infrastructure

Providers and developers will look to secure commitments for power as early as possible in the process.

“This is quite a change from a few years ago when land would be secured and pre-development steps engaged before a power commitment was negotiated,” Albers noticed.

A roadmap and commitment to sufficient power is a pre-condition of securing land now. EdgeCore Chief Commercial Officer Clint Heiden agrees that securing power will be among the top issues that the data center sector will face.

“Moving forward, we are likely to see land acquisition practices begin by identifying areas with available power and then searching for developable land nearby,” Heiden told CPE.

The EdgeCore executive believes that how fast a project is brought to market will no longer be a bottleneck. Rather, the speed at which developers can secure power and equipment for the site and how they can manage supply chain delays will be more of a constraint going forward. Heiden anticipates these issues to continue to play out as a primary hurdle in 2024 and beyond, as data centers are constructed, retrofitted and expanded to meet modern density demands.

Leveraging AI will require updated infrastructure

Over the past decade, large land sites for data center campuses have become a common occurrence—sites ranging from 100 acres to more than 500 acres tied into developers’ strategy of mitigating land price fluctuations, as well as meeting hyperscale demand.

“The move toward creating more efficient, scalable data centers that can handle the enormous demand of AI and ML will continue to be a core theme in the foreseeable future,” Heiden told CPE. Image courtesy of EdgeCore Digital Infrastructure

Today, AI is triggering a paradigm shift in terms of infrastructure. While power availability will be vital, this new technology will have a huge impact on other aspects, as well.

“Everything else is or will be different—cooling systems, redundancy levels, latency and network requirements and more,” Brown said.

Vantage Data Centers Senior Vice President of Sales and Solutions Engineering Steve Conner told CPE that AI deployments can reach rack densities up to five times higher than traditional cloud computing, which leads to cooling requirements also becoming more complex. Increasing demand for high-density AI deployments has already prompted discussions around reconfiguring data center layouts to account for liquid cooling distribution units closer to the racks while delivering the space necessary to support the plumbing systems.

“The cooling technology itself likely won’t change too much, rather it comes down to a conversation about liquid versus air and the associated ratios,” Conner noted.

At first, there probably won’t be drastic changes with the technology itself. However, data center operators will likely make changes at the design and architecture specification level, to make sure their buildings can support this additional infrastructure.

Generally, AI, machine learning and high-performance computing will drive higher rack density requirements, which will range between 25 to 100 kW per rack—in the past, it was common to have densities of under 15 kW per rack. Working toward technologies that can balance the needed cooling with reducing environmental impact through recycling water usage and waste heat will also be a key issue going forward, Albers believes.

Sustainability-linked instruments will proliferate

Colton Brown pointed out that the push for efficiency is not unique to AI—from water efficiency to power, land and capital efficiency, all resources are finite and must be utilized in a sustainable way. Image courtesy of Aligned Data Centers

As the need for higher scale rises, so too will the focus on sustainable development and operation. Organizations will increase their focus on ESG managing and reporting, which will initially lead to higher Scope 2 and 3 emissions as these processes evolve, according to Mallory.

Flexential’s latest generations of data centers are all built with climate-optimized features, including power usage effectiveness of 1.25 and water usage effectiveness at zero, while their cooling infrastructure mitigate the company’s carbon footprint.

Overall, developers’ focus to positively change how the data center industry impacts the environment has generated multiple-faceted initiatives at all levels. As new facilities are being designed, owners are considering the environmental needs of the geography they are based in. In water-constrained markets, for example, utilizing closed-loop systems is a way to mitigate the use of this precious resource.

“Providers should continue to nurture the ecosystem between local communities, governments and power companies as the industry works to be more efficient and sustainable,” Heiden said.

READ ALSO: 2024 Forecast—More of the Same?

Those who want to bring modern data centers to the market need to strike a balance between debt financing and equity capital in order to be successful.

“Providers must be more intentional when determining the optimal capital structure, especially when meeting capacity demands driven by AI and hyperscalers, among other factors,” Heiden mentioned.

A solution to reaching this balance is green financing, which will continue to gain traction in 2024, specialists agree. Companies have begun using green bonds and sustainability-linked loans, along other similar financial instruments. Vantage, AirTrunk, Aligned, EdgeConnex and many others all utilized these methods a lot more in 2023.

Next year and beyond, the data center industry will likely continue its strong growth across all fundamentals, but a key aspect for all players going forward will be the collaboration with local utility providers and community groups to advance the sector’s sustainability goals.

The post Will the Data Center Industry Grow More in ’24? appeared first on Commercial Property Executive.

A rendering of DC BLOX’s new campus in Conyers, Ga. Image courtesy of DC BLOX

DC BLOX has purchased 72 acres of land for the construction of a two-building, 216-megawatt hyperscale-ready data center campus in the Atlanta suburb of Conyers, Ga.

The 750,000-square-foot project, designed to meet the Uptime Institute’s Tier 3 certification, will be built in two phases, with the first expected to deliver in the fourth quarter of 2025. An unnamed hyperscale client has signed on as the anchor tenant for the initial phase, and an additional 160,000 square feet of space will be available for lease to additional tenants.

According to DC BLOX, the development has been granted incentives from the Development Authority of Rockdale County via the Conyers Rockdale Economic Development Council. The facilities have been designed by Thomas & Hutton and Corgan, while Evans General Contractors will be in charge of the construction process. Bennett & Pless and DLB Associates will oversee structural and mechanical engineering.

The campus’ tech specs

Upon completion, the property will include one 30-megawatt facility and another capable of accommodating 80-megawatts of power. In total, the campus will be able to support a critical load of up to 150-megawatts, with energy supplied by Georgia Power.

READ ALSO: How Will AI Impact Data Center REIT Investment?

When completed, the campus will be connected to new dark fiber ring being built around metro Atlanta. The ring itself will link up with a 500-mile dark fiber route that extends to a cable landing station in Myrtle Beach, S.C. That project, which connects the future site with hubs in downtown Atlanta, Augusta, Ga., as well as Charleston, S.C., broke ground in October of 2022, and is expected to come online later this year.

On the inside, the facilities will include 26,000-square-foot data halls, each equipped with 10-megawatt power blocks. The buildings’ base temperature control solutions will incorporate N+2-redundant air-cooled chillers with magnetic bearings, as well as N+5-redundant vertically set fan coils lining the data halls themselves. Additionally, the spaces will be able to accommodate liquid cooling.

Adding to a data center hub

The project, which lies 24 miles outside of Atlanta, is the firm’s second development in the area, following last month’s groundbreaking of a $1.2 billion, 180-megawatt facility located in Lithia Springs, Ga.

Both projects are taking shape at a time when the Atlanta data center market has experienced considerable upticks in investment, development and leasing, owing in part to energy delivery limitations in Northern Virginia, as well as to the need to accommodate local operations from the likes of Apple, Alphabet and Microsoft. According to an October 2023 market update from Cushman & Wakefield, the city has 670 megawatts of space under construction, with an absorption of 121 megawatts. Presently, the market has 480 megawatts of space in operation, and a vacancy rate of 2.9 percent, one of the lowest in the country.

Within a week of DC BLOX’s groundbreaking on its Lithia Springs facility, DataBank announced the addition of 120 megawatts to the city’s pipeline, acquiring 95 acres of land for the construction of a 1 million-square-foot facility expected to come online in 2026.

The post DC BLOX to Build 750 KSF Data Center Campus in Atlanta Suburb appeared first on Commercial Property Executive.

Blackstone—whose NYC headquarters is pictured above—has poured several billions in data centers this year alone. Image courtesy of CommercialEdge

Digital Realty has entered a joint venture with funds controlled by Blackstone for the development of four new data center campuses in three primary markets—Northern Virginia, Paris and Frankfurt. The partnership expects to invest $7 billion over several years and develop up to 10 data centers that will support 500 megawatts of IT capacity upon full build-out.

Blackstone will acquire an 80 percent interest in the joint venture for $700 million in initial capital contributions. Digital Realty will retain a 20 percent share of the partnership. After the deal closes, the partners will fund their pro rata share of remaining development costs. The joint venture agreement is expected to close in two stages through the first half of 2024.

Digital Realty will manage the development process and will oversee day-to-day operations of the joint venture. The global provider of cloud and colocation data centers expects to leverage roughly 20 percent of its sizeable land bank for this partnership.

READ ALSO: Debt Markets Remain Open to the Data Center Industry

Of the total upcoming capacity planned by the joint venture, 46 megawatts are currently under construction and 33 percent is preleased. The remaining space is in pre-planning stages and will be rolled out depending on customer demand. Roughly 100 megawatts are planned to come online through 2025, while the rest is set to be delivered in 2026 or later.

Data center investments continue at a record pace

The deal comes on the heels of several other massive agreements, making 2023 yet another year of growth for the data center sector. In August, Digital Realty entered a joint venture with TPG Real Estate Partners, valued at $1.5 billion. In that deal, the global provider sold an 80 percent stake in three stabilized assets located in Ashburn, Va.

Blackstone had another milestone in its continued push to invest in data centers. In a record-breaking deal at the time, the investment giant spent $10 billion in 2021 to acquire QTS Realty Trust. This year in July, the company announced it has sold off other assets to fund an $8 billion commitment to build new data centers through QTS, DCD reported.

Other large-scale 2023 investments include the $1 billion commitment from AREP subsidiary PowerHouse Data Centers in Sterling, Va., where it will develop a new campus in partnership with Harrison Street; Google’s $1 billion, 187-acre upcoming campus in Mesa, Ariz., scheduled to come online by 2030; AWS’ plans to expand its Virginia presence, where it intends to invest $35 billion over 17 years, in tandem with the $7.8 billion expansion the cloud provider has planned for Ohio.

Largest data center market overcomes hurdles

Digital Realty owns 16 facilities—encompassing more than 4 million square feet—within Northern Virginia, the largest data center market in the world. The company’s network ecosystem provides access to more than 145 cloud and network service providers.

According to CBRE research, the Northern Virginia market had one of the lowest vacancies in the U.S. in June, under 1 percent. The market’s inventory stood at more than 2.2 gigawatts, with a construction pipeline amounting to more than 900 megawatts.

However, one of the main challenges of this primary market was power availability. Last year, Dominion Energy, the main utility provider for data centers in the market, highlighted a potential bottleneck in Ashburn, Va., which might have led to some projects being stalled. It also led to other adjacent counties receiving more investments and development, as demand in Northern Virginia did not slow down as a result, with developers shifting strategies.

The post Blackstone, Digital Realty Form $7B Venture appeared first on Commercial Property Executive.

PowerCampus Dallas will feature as much as 300 MW of power. Image courtesy of Skybox Data Centers

Skybox Datacenters has begun the development of a new data center campus, PowerCampus Dallas, in partnership with developer Bandera Ventures and Principal Asset Management.

The 115-acre campus, just south of downtown Dallas, will feature as much as 300 MW of power supported by a private on-site substation and up to 1 million square feet of data center space. N, N + 1 and 2N configurations will be available.

Amenities will include EV charging stations, bike racks, shower facilities, customizable office space and a visitor center.

PowerCampus is a product line from Skybox for large-scale data center assets tailored to hyperscale clients across major and emerging U.S. markets.

READ ALSO: Data Center Leasing Picks Up

Skybox highlights the Dallas market’s “excellent proximity to cloud providers and exchanges as well as substantial network availability to major metros,” along with its low energy costs, access to renewable power, and local and state tax incentives. In addition, Texas offers a state sales tax exemption on electricity or equipment for qualifying data centers.

Bigger in Texas

Ranked as one of the nation’s eight primary data center markets, metro Dallas is seeing steadily high demand, especially hyperscale and enterprise demand, with 75 MW of leases and 68 MW of net absorption in the first half, according to an Americas Data Center Update released in October by Cushman & Wakefield. Overall vacancy is just 3.4 percent, and a hefty 140 MW is under construction, in the context of 650 MW now in operation.

In March 2022, Skybox announced that in a partnership with Prologis, it would build a $500 million–plus data center on a 25-acre site in Austin’s Silicon Hills submarket. Completion of the 30 MW, 141,000-square-foot first phase was scheduled for December of last year.

The post Skybox, Bandera Ventures Launch 1 MSF Data Center Project appeared first on Commercial Property Executive.

James Raisides, managing partner at TA Realty, leads the firm’s portfolio management team. Image courtesy of TA Realty

TA Realty has leased its entire 1.9 million-square-foot, five-building data center campus in Loudoun County, Va., to a global cloud services provider. Construction on the 430 MW build-to-suit complex in Leesburg is slated to start by the end of this year and completion is expected in 2027.

Situated on the east side of Sycolin Road, the 95-acre development site is bound by Cochran Mill Road to the north and Energy Park Drive to the south, strategically positioned atop major fiber routes and alongside transmission lines. The location is suitable for data center construction also due to an adjacent power plant, logistics facility and existing power substation.

This build-to-suit lease marks the formation of a new group at TA Realty dedicated to digital infrastructure, which will be formally unveiled in early 2024.

READ ALSO: Data Center Leasing Picks Up

Once complete, the TA Realty campus will be among the largest and most modern in the area. The company first announced the project in May 2021. Back then, plans called for a 300 MW, 1.5 million-square-foot complex that would have cost $1.8 billion to develop. The first buildings were expected to come online in late 2021. TA Realty had paid $60 million for the development site in March 2021, according to Loudoun County records.

Buddy Rizer, executive director of Loudoun Economic Development, said in a prepared statement TA Realty is showing its commitment to Loudoun County by building a new water pump station on the site that will improve the quality and distribution of water in the region.

Northern Virginia’s data center growth

Loudoun County is home to the largest concentration of data centers in the world. Overall, Northern Virginia has an estimated 18 million square feet of data center space in operation with more on the way. In January, Amazon Web Services announced it will commit $35 billion over the next 17 years to expand its data center operations in Virginia, essentially doubling its presence in the state.

Other Virginia projects include STACK Infrastructure’s 80-acre campus in Sterling, along with the $1 billion commitment by a joint venture of American Real Estate Partners and Harrison Street aiming to bring online 2.1 million square feet of data centers. As part of that commitment, Powerhouse Data Centers, an AREP subsidiary, in October began demolishing the former AOL headquarters in Sterling that will be developed into a three-building data center campus.

The post TA Realty Lands 1.9 MSF Tenant for Data Center Campus appeared first on Commercial Property Executive.

DataBank’s ATL5 facility will comprise two multi-story data centers ready for hyperscale deployments. Rendering courtesy of DataBank

DataBank is expanding its presence in Atlanta with a new, 120-megawatt data center. The developer has acquired 95 acres of land in Lithia Springs, Ga., where it will build a 1 million-square-foot facility. The first of the two planned buildings is expected to come online by 2026, DataBank CEO Raul Martynek confirmed for Commercial Property Executive.

Slated to also include a 180-megawatt substation from Georgia Power, this new data center will be the company’s fifth and largest in the Atlanta market. DataBank cited increased demand for AI/ML applications as the reason for this expansion.

READ ALSO: AI Drives Explosive Growth in Data Center Demand

DataBank will construct ATL5 to meet demand for new hyperscale cloud and other enterprise clients. The company will leverage its Universal Data Hall Design, which involves first and foremost accommodating these high-performance computing needs. Key features of this design include a layered building approach that allows for flexibility in terms of infrastructure, capacity for high density deployments, as well as different cooling methods for each data hall, depending on client demands.

“Considering AI/ML workloads require significantly more power and cooling than traditional workloads, many existing data centers may need to be reconfigured. In fact, HPC workloads consume as much as 10 times the power than conventional ones. With more power needs, come greater cooling needs as well. Thus, HPC-ready data centers have a more demanding infrastructure requirement,” Martynek told CPE. “There are not remotely enough data centers with such capabilities currently, so many more will need to be built to meet such demand,” he added.

Plentiful land and power contribute to Atlanta’s booming market

DataBank’s fifth facility in Atlanta will be its largest so far, at roughly 1 million square feet. Rendering courtesy of DataBank

DataBank has been active in the Atlanta market since 2018, when it developed ATL1 in partnership with Georgia Tech. Since then, it has expanded by acquiring two data centers in 2021. The firm also owns another 18 acres of land in Lithia Springs, where it is building the ATL4 facility, which has been fully pre-leased.

DataBank currently operates just under 300,000 square feet of data center space in the market, providing 55.1 megawatts of critical load across its existing facilities.

According to Martynek, Atlanta has plentiful land and a friendly business climate, enabling the growth of the data center sector in the region. Other advantages include the availability of long-haul fiber and good overall connectivity. “Atlanta has some of the lowest utility rates in the country for a major metropolitan area,” Martynek mentioned.

Several other companies have recently made commitments to the Atlanta market. DC BLOX broke ground on a $1.2 billion data center, also in Lithia Springs, while Microsoft acquired 350 acres for a $1 billion campus in Rome, Ga.

As of June, Atlanta had 235.6 megawatts under construction, a recent CBRE report shows. The market’s 7.4 percent vacancy rate indicates a healthy amount of absorption, with most of the new development preleased to hyperscalers. Taking into consideration planned facilities as well, the pipeline amounted to more than 2 gigawatts, according to the same source.

The post DataBank to Develop 120 MW Atlanta Facility appeared first on Commercial Property Executive.

DC BLOX’s upcoming facility will utilize waterless cooling and target a power usage effectiveness of 1.3 at full load. Rendering courtesy of DC BLOX

DC BLOX has broken ground on a new data center in Lithia Springs, Ga. The company will invest $1.2 billion in a two-story, 180-megawatt facility dubbed Project River. First customer move-ins are expected in 2025’s third quarter.

Evans General Contractors will construct the facility on a 55-acre parcel. The development team also includes design partners DLB Associates, Corgan, Thomas & Hutton and Bennett & Pless, all of which have worked before with DC BLOX and Evans. The owner also worked with Elevate Douglas Economic Partnership to secure tax abatements for the project.

READ ALSO: Data Center Leasing Picks Up

Set to operate at a power usage effectiveness of 1.3 at full load, the facility will be a waterless design. “By avoiding traditional water usage and employing cutting-edge cooling methods, we are taking steps to enhance the reliability and longevity of our IT equipment while reducing energy consumption spent on cooling, making our data center operations highly sustainable and cost-effective. We have implemented provisions for liquid cooling in the future, as we look to the future of larger cooling demands for AI and HPC,” a DC BLOX spokesperson told Commercial Property Executive.

Ready for high-density AI/ML applications

Project River will encompass 12 data halls totaling 750,000 square feet of gross space across two buildings. Each data hall is planned to measure 26,500 square feet and have 10-megawatt power blocks, amounting to 318,000 square feet of raised floor space and 120 megawatts of critical IT power. The campus is designed to meet demands for hyperscale, AI and ML applications, with densities at roughly 375 watts per square foot.

DC BLOX’s cable landing station in Myrtle Beach, S.C. can host up to five subsea cables, along with colocation space. Photo courtesy of DC BLOX

The company spokesperson told CPE that such applications “place higher demands on data centers due to the significantly higher density of power required to run AI infrastructure. Ensuring that enough power has been reserved and committed for future builds is an important consideration for any company deploying high power dense workloads like AI/ML in a data center.”

Taking shape alongside North River Road, DC BLOX’s new facility will also be directly connected via dark fiber to the Myrtle Beach, S.C., landing station. The company broke ground on the 500-mile route in October last year—the first high-capacity fiber path connecting hubs in Atlanta, Augusta, Ga., and Myrtle Beach. The cable is expected to be fully operational later this year, while the landing station has been already brought online.

Explosive growth of Atlanta’s data center market

Atlanta is a primary data center market that had 235.6 megawatts under construction at the end of June, according to CBRE research. Land banking acquisitions reached over 2,000 acres, which led to a rise in prices, the same source shows.

The DC BLOX spokesperson told CPE that Atlanta emerged as a preferred location for major tech companies and hyperscale users—such as Google, Microsoft, Meta and Amazon—due to the affordability of land and availability of power.

Earlier this year, Georgia Power, the state’s largest utility provider, has successfully brought online a new nuclear facility, which, according to CBRE, has more than 1 gigawatts dedicated for data center use.

Several other big names are currently building data centers in the region. DC BLOX’s Project River is next to Microsoft’s 300-acre, 1 million-square-foot facility—which was announced in August 2021 and is expected to come online this year. DataBank has also acquired 95 acres of land in Lithia Springs, where it will construct a 180-megawatt data center also targeting AI and ML users.

The post DC BLOX Breaks Ground on $1.2B Atlanta Data Center appeared first on Commercial Property Executive.

Vantage Data Centers completed the first phase of its 96 MW campus in Ashburn, Va., that will total 800,000 square feet. Image courtesy of Vantage Data Centers

Data center leasing in the top U.S. markets started 2023 off slower than in past years but grew substantially through the rest of the first half, with many markets seeing strong preleasing activity and build-to-suit projects moving forward.

A new Cushman & Wakefield Americas data center update states many of those developments were driven by hyperscalers seeking to expand capability of sites to handle increasing artificial intelligence demands.

The report, which gives details about the top 10 data center markets in the U.S. as well as markets in Canada and Latin America, notes development is increasingly being constrained by limited power availability and rising land costs. Those dual headwinds are resulting in established markets like Portland/Eastern Oregon seeing more rapid growth or top markets like Northern Virginia seeing competition for colocation or hyperscale self-build purposes and the expansion of the market further away from Loudoun County to other parts of Virginia and even into nearby Maryland. Georgia, in particular the Atlanta market, is seeing a boost of data center development in part due to growing power limitations in Northern Virginia.

READ ALSO: What CRE Needs to Know About GenAI

Another trend cited by Cushman & Wakefield is major players opting for larger site acreages and power purchase agreements much earlier in the development process than in the past.

“With larger upfront commitments, data center developers will have greater leeway to phase out campuses at their own pace without constrictions for either unavailable power or searches for additional sites,” writes Jacob Albers, Head of Alternatives Insights and Global Think Tank research manager at Cushman & Wakefield.

The Cushman & Wakefield data center update classifies Atlanta, Chicago, Dallas, Northern Virginia, Phoenix and Silicon Valley as primary markets; and Columbus, Ohio; New York/New Jersey and Portland/Eastern Oregon as established markets, and Austin, Texas, as a secondary market.

Here’s a look at three of the larger markets outlined in the report:

Northern Virginia and outlying

Northern Virginia continues to be the top data center market in the U.S. with 4,507 MW in operation, including 447 MW absorbed in the first half of the year, another 396 MW under construction and a vacancy rate that remains at an all-time low of 0.9 percent. Despite growing headwinds for land and power availability, operators continue to expand the pipeline. The report notes that new projects have increasingly been planned further away from the market’s traditional data clusters like Loudoun County, where infrastructure is being upgraded to add more power, and Prince William County. In the past year, projects have been announced as far south as Richmond. The report states as interest in AI increases, peripheral developments in Southern Virginia, Maryland, West Virginia and North Carolina will continue to grow.

Major players planning projects or already developing projects include AWS, which has filed proposals for various sites such as Stafford County (510,000 square feet), Manassas (250,000 square feet) and Warrenton (220,000 square feet). AWS has also received approvals in King George County to construct a 7.3 million square-foot, 19-building campus.

Microsoft is expanding its Leesburg campus with two additional data centers and has announced plans for a 500,000-square-foot data center in Arcola. It also signed a nuclear PPA with Constellation to power its Boydton data center campus.

Vantage Data Centers completed the first phase of its 96 MW campus in Ashburn that will total 800,000 square feet. Peterson Cos. has proposed a 2.1 million-square-foot campus in Culpeper that will cover 150 acres of rezoned land and STACK Infrastructure plans to build 96 MW across two buildings in Manassas.

Phoenix

The Phoenix market reached a record level of absorption of 411 MW in 2022 and may surpass that this year with 325 MW absorbed in the first half of the year and 276 MW under construction. The market has a total of 1,257 MW in operation. Cushman & Wakefield notes hyperscalers and colocation providers alike have evaluated land across several submarkets including Arizona’s Mesa, Chandler, Goodyear, Glendale and Avondale.

“All major U.S. hyperscalers either have an established foothold or extensive plans to grow in the market. Market colocation veterans as well as new entrants continue to acquire land and break ground on new projects,” the report states.

While it’s not expected to limit growth in a market that already has a tight 2.8 percent vacancy rate, there are some concerns about the power grid and water usage issues. More private solar developers are building solar farms to help with the power grid, which currently is mainly a mix of natural gas and nuclear. The report states more state and local governments are asking data center operators to limit water usage and are incentivizing air-cooling technologies.

Companies that are planning or already constructing data centers in the market include AWS, Google, QTS, STACK Infrastructure, Prime Data Centers, Vantage Data Centers, and CT Realty, which is proposing two data centers (600,000 square feet and 196,000 square feet) as part of a 2.6 million-square-foot industrial and data center campus called Winner’s Circle Business Park on the site of the Turf Paradise horse racetrack in north Phoenix.

Portland/Eastern Oregon

This region has historically been considered a secondary market, but Cushman & Wakefield notes the core Portland market as well as outlying areas in Eastern Oregon have “become a hotbed of development over the past several years.” The report cites plentiful renewable energy, more affordable land parcels and proximity to West Coast markets as drivers of the growth from both hyperscalers and colocation providers who are quickly building campuses in the area. The market has a 2 percent vacancy rate and has seen 54 MW absorbed in the first half of 2023. With 1,040 MW already in operation, there is 383 MW under construction now.

Within Portland, 90 percent of the activity is in the Hillsboro data center cluster, where QTS, Digital Realty, STACK Infrastructure, Flexential, NTT and EdgeConneX have either developed properties or are under construction. In Eastern Oregon, hyperscalers including Google, Amazon and Meta have been establishing sizable data center campuses in several counties. Amazon is planning to invest $12 billion in a five data-center portfolio in Port of Morrow.

A glimpse into other notable data center markets

Here’s a quick look at statistics for the seven remaining U.S. markets included in the update:

• Atlanta—121 MW absorption, first half 2023; 670 MW under construction; 480 MW in operation; 2.9 percent vacancy rate;
• Austin—1 MW absorption, first half 2023; 102 MW under construction; 41.5 MW in operation; 10 percent vacancy rate;
• Chicago—72 MW absorption, first half 2023; 402 MW under construction; 688 MW in operation; 5.1 percent vacancy rate;
• Columbus, Ohio—3.7 MW absorption, first half 2023; 383 MW under construction; 475 MW in operation; 7 percent vacancy rate;
• Dallas—68 MW absorption, first half 2023; 140 MW under construction; 650 MW in operation; 3.4 percent vacancy rate;
• New York/New Jersey—10.7 MW absorption, first half 2023; 63 MW under construction; 376 MW in operation; 5.8 percent vacancy rate;
• Silicon Valley—43 MW absorption, first half; 315 MW under construction; 824 MW in operation; 4.5 percent vacancy rate.

The post Data Center Leasing Picks Up appeared first on Commercial Property Executive.

The demolition is slated for completion by early 2024. Image courtesy of PowerHouse Data Centers

PowerHouse Data Centers, a subsidiary of American Real Estate Partners, has begun demolition on a former AOL headquarters in Sterling, Va., where it will develop a new data center campus. The company, in partnership with Harrison Street, acquired the 43-acre site for $136 million in 2021, as reported by the Data Center Frontier.

PowerHouse Pacific will comprise three buildings totaling approximately 1.2 million square feet, along with a 2-acre power substation and will have a maximum capacity of 265 MW. The demolition is slated to finish by early 2024, enabling the power substation to commence construction in partnership with Dominion Energy, scheduled for completion in the summer of 2024.

Current structures on the site include two parking garages, three office buildings, one mail hub and a pedestrian bridge. The buildings will break ground in the fall of 2024, with delivery anticipated in mid-2026. E.E. Reed Construction will serve as general contractor.

A $1 billion commitment in Northern Viriginia

Located off Pacific Boulevard, the site is roughly 30 miles from Washington, D.C., and some 5 miles from the Dulles International Airport. It is also less than 3 miles from the joint venture’s first data center project in the area, the 265,580-square-foot ABX-1, which is now leased to CyrusOne on a 30-year term. These two developments are part of a $1 billion commitment to construct 2.1 million square feet of data center space in Northern Virginia.

Data center supply in primary markets saw a 12 percent increase in 2023’s first half, along with an all-time largest development pipeline for the asset type being recorded at 2,288 MW, representing a 25 percent year-over-year increase, a recent CBRE report shows. Northern Virginia has been the best performing market in the sector, registering a vacancy rate of 0.9 percent, the same source shows.

The region continues to attract new investors, such as Digital Realty’s recent $1.5 billion joint venture agreement with TPG Real Estate Partners for three data centers in the area.

The post AREP JV Kicks Off Northern Virginia Data Center Campus appeared first on Commercial Property Executive.

Julie Brewer believes data centers are a bright spot in the CRE industry, benefitting from the growth in infrastructure capital availability. Image courtesy of EdgeCore

Over the past few years, data centers have become increasingly popular among commercial real estate investors. Demand for data center capacity has grown exponentially, with private equity investments in the sector reaching record highs in both 2022 and 2023, according to Julie Brewer, EdgeCore‘s senior vice president of finance.

“Operators and their equity backers continuously seek to extend their capabilities, which have evolved as data centers have become mainstream,” Brewer told Commercial Property Executive.

As an expert with extensive finance and general management experience specific to the data center industry, she leads EdgeCore’s fundraising efforts in equity and debt capital markets. CPE asked Brewer to expand on what’s driving CRE investors to this highly coveted asset class, and weigh in on how data center developers are leveraging debt financing in today’s tight economic climate.

How has demand for data centers evolved? We’ve seen more and more traditional CRE investors and lenders enter the space—how has this influenced financing?

Brewer: Although data centers have been in operation for over two decades, they have only recently become broadly recognized in the real estate investing community. Even 15 years ago, a limited number of CRE investors and lenders were familiar with the data center space. Today, data centers are among the most popular CRE asset classes and growing at a rate faster than nearly any other asset class.

At a high level, commercial real estate assets are straightforward investments, with economics driven by cost to build, market lease rates, debt availability, and asset valuations. Like other CRE assets, data centers have unique characteristics, including robust power and cooling infrastructure on which data center tenants rely. Over time, CRE lenders and investors have become more familiar with the data center space, resulting in increased access to capital from traditional real estate sources.

READ ALSO: AI Drives Explosive Growth in Data Center Demand

Given the current high interest rates, how open are lenders to finance new projects in the data center sector? Is the rising demand for data center facilities transcending lenders’ caution?

Brewer: Current inflation and interest rates are certainly driving up costs, but the debt markets remain open to the data center industry. Data centers drove a solid portion of debt fundraising activity in the first half of 2023, and the pace has not slowed. Data centers are a bright spot in the CRE industry and benefit from the growth in infrastructure capital availability.

Despite the higher risk and higher cost investing climate, demand for data center capacity continues to reach record highs. As the industry has matured, lenders and investors alike have developed a stronger understanding of data centers. The industry has robust fundamentals that attract capital—high credit tenants, long-term leases, real assets that are usable across a wide base of tenants, and a tenant base that often invests significant amounts of their own capital in the data centers.

In such a competitive market, what unique value propositions or factors does EdgeCore present to lenders to instill confidence in the feasibility of its projects and the ability to service debt obligations?

Brewer: EdgeCore’s business model prioritizes growth and scaling to meet market demands and evolving customer needs. As a developer that designs for density, we provide the bigger pieces like secured power with a runway for growth, making EdgeCore more of a solutions provider. We have a proven track record of delivering for the world’s largest tenants in some of the largest data center markets. Our key vendor relationships further add to our delivery capability.

Our facilities are constructed using green building standards, and we offer our customers valuable tax incentives, wherever possible. Serving the world’s largest cloud and technology companies, we build data centers in areas that maximize the pool of potential customers while designing them to performance standards.

The financing community also understands the importance of green power. Green bonds are on the rise as they are more sustainable and meet the underlying demand to achieve a greener environment. We see this demand from all angles—our customers, our investors, our lenders, and the communities in which we operate—and this can be achieved through additional tools such as Power Purchase Agreements where power is purchased and Renewable Energy Credits are generated by the project.

EdgeCore’s 200-megawatt campus in Mesa, Ariz., was among the first facilities the company developed since its inception in 2018. Image courtesy of EdgeCore Digital Infrastructure

How has EdgeCore navigated the challenges in securing debt financing so far this year?

Brewer: EdgeCore Digital Infrastructure has leveraged our proven reputation in the market alongside our financial sponsor Partners Group. Despite a volatile capital marketplace, EdgeCore has maintained strong relationships and kept pace with the evolving debt markets to ensure access to the liquidity that we need.

Last year, Partners Group committed to invest up to $1.2 billion in the acquisition and recapitalization of EdgeCore. Has your strategy changed following this deal? 

Brewer: Following the Partners Group acquisition, EdgeCore is surging on the buildout of our existing portfolio of campuses, acquiring more land parcels in North America that can support a minimum of 300+ MVA of power, and expanding our sustainability initiatives. Our new standard and scalable building design can flex from 36 to 144 megawatts per data center.

The strength of the Partners Group commitment accelerates the growth of EdgeCore’s platform while enhancing data center infrastructure and services for our customers. This helps us better support both the longevity and development of our campuses and enables further development of data centers across new markets.

In August, EdgeCore broke ground on its newest facility, in Reno, Nev., which is expected to come online in 2025. Rendering courtesy of EdgeCore

What projects and areas is EdgeCore focusing on? How are you preparing to support AI requirements?

Brewer: Our current projects are in four markets across the U.S., including Phoenix; Reno, Nev.; Northern Virginia and Silicon Valley. EdgeCore’s campus in Mesa, Ariz., covers 1.1 million square feet with the capability to support more than 200 megawatts of critical load, and our Reno campus supports 216 MW of critical load across more than 1.5 million square feet. The scales of EdgeCore’s Mesa and Reno campuses are well-situated to support the requirements of AI.

As one of the largest and most critical data center markets, EdgeCore also provides services to Silicon Valley as part of our recent expansion in January of this year. Upon completing our LEED-designed data centers in Santa Clara, Calif., the campus will support 72 MW of critical load across 540,000 square feet.

Investors and lenders want to ensure the power supply is available to support the development plans and commitments operators make on their campuses. EdgeCore and each member of our team have a proven ability to develop land and secure power for scalable data center campuses, and our current campuses are no exception. Each campus has a secure pathway to power resulting from close collaboration with utility providers.

AI deployments are poised to contribute greatly to demand for more data center space. To what extent do you expect this trend to influence the data center sector? Is it already impacting EdgeCore’s strategy?

Brewer: Generative AI is disrupting all businesses, including data centers. AI is adding to data center demand that’s already strong. However, it’s still in its early stages; the future of AI remains subject to a wide array of factors, including power availability, government regulation, and further development of specific use cases and the large language models that underpin the products.

There’s still much to be discovered when it comes to supporting physical requirements for space and power for generative AI. EdgeCore is ready to meet the challenges and opportunities presented by this growing segment of the economy with our scalable campuses and data center facilities that are designed for density.

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