Data Center Land Development
Can anyone share info about data center land development.. Sounds like an hidden gem right now. People are buying cheap farm land, getting it rezoned/approved for a data center, and then selling it for $1m plus per acre to a developer(without actually developing anything). Can someone explain the downsides/why this is more complex than it appears.
Can’t speak for the US but in Europe, no DC developper is actually going to buy the land until they have secured power and signed an agreement with the public utility provider. This could be relatively easy or quite difficult depending on surrounding infra and the saturation of the power network.
Then they also consider overall location (you don’t want to be too close to other people but not too far away), fiber connection points, local juridiction…
So the potential suitable plots might appear to be many but in the end the actual plot that do get built on are quite few.
Just my 2 cents from someone in the industry but without the formal finance/RE background.
That’s dead on from what I’ve seen in the US. Can’t speak from the development side, but I’m involved in the investment sales side on a 250+ acre data center parcel and have done extensive research on the market. Crucial thing is the load letter from the energy provider. In my experience, normally they will give you a load stating they can provide xxx on xyz date, and sometimes a ramp up from there to your long term load. Water is also a necessary utility and sometimes can be tricky or expensive to sort out.
I have a few friends who are industrial developers that have thought about trying to do the DD on a piece of dirt then flipping it to a developer. None have done anything yet because it seems almost too easy in some cases and it’s uncharted for many.
OP, you might like this guide that Cushman released the other day. Talks a bit about the current data center development challenges
https://www.cushmanwakefield.com/en/united-states/insights/data-center-…
That article is more about construction/dev. costs. I more thinking about the land flipping play where you don't actually develop anything. Appreciate the help though!
My sweet child, what do you think the person who bought the land does with it? The cost / ability to develop are what make the land flip possible.
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My team explored a couple of these, just going a little further with actually powering the land before flipping to a developer or staying in ourselves - our main concern was around power as many have mentioned. For us to get comfortable the land needed to be in direct proximity to a high KV transmission line (ideally upstream so it was cheaper from the utility), but really the main thing is switchgear and acceptance from the utility. Their load studies (market and utility dependent) had extreme lead times, not to mention the lead times for switchgear and other actual hard power equipment to get the line to the site. One of the MFs for example has been stockpiling that since '20 and some of the others bought into switchgear manufacturers to jump the line.
These were things that came up in the land stage alone - I think it's critical to be able to see the rest of the path from day 1 to avoid jumping in on something that sounds cool but doesn't work. This project ended up dying on the vine despite having land locked up at a price that would theoretically work for industrial as a last resort. We ended up stepping away due to discomfort with the space in general.
It isn’t just the presence of a line, but also a line that can carry more power. The ideal data center site from a power perspective would be somewhere that a utility has an excess of generation but no load to use that power.
The capacity of the wires is going to be a major factor as to how much power a site can get and what kind of upgrades will be needed to get power up and running.
There has been a lot written about the interconection queue on the renewable generation side of things, but it holds true for users as well as generators or energy.
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