Got land for a data center?

The iconic "Got Milk?" campaign made us question the essentials we often take for granted. Today, a new wave of questions ripples through the tech industry: Is the data center boom just hype? Is it sustainable? Do we have enough land? Enough power?

These are the inquiries I hear weekly – and I’ve asked the same of experts at Ramboll and industry colleagues alike. The answers are clear: the data center boom isn’t just coming; it’s already here, reshaping landscapes and economies. But like milk in the fridge, there’s an expiration date on preparation.

For landowners, the window to capitalize on this growth is now. Here’s what you need to know to position your land as a prime contender in this rapidly evolving market.

The AI revolution

The rise of artificial intelligence (AI) is enabling exciting advancements – from self-driving cars and breakthroughs in healthcare to AI-generated music, videos, and more. These innovations require immense computational power and vast amounts of data. Yet, beneath these technological advancements lies the infrastructure enabling their growth: data center buildings and edge facilities housing the data, transactions, and interactions fueling the AI revolution.

Acquiring land for a data center

Not all land is suitable for a data center. A variety of factors determine whether the land is viable, and addressing these considerations can make it more appealing to co-location providers, hyperscalers, and edge facility operators.

Key factors to consider:

• Data center providers in the area: While not essential, nearby competitors can create a competitive cluster that drives investment and facilitates comparison.
• Tax incentives: Municipalities often offer tax incentives to attract data centers, which drive local economic growth by attracting not only competitors but also housing, restaurants, hotels, and educational institutions.
• Water availability: Cooling is crucial for data centers as hardware generates significant heat. While proximity to a reliable water source is important, hyperscalers are increasingly using waterless closed loop systems with zero-water evaporation design.
• Fiber availability: Strong fiber infrastructure supports data center capacity, latency needs, and reliable data transfer. Providers or hyperscalers may also install their own fiber to meet specific performance needs.
• Urban proximity: While some data center providers and hyperscalers prioritize location based on incentives or power availability and bring their own workforce, proximity to urban hubs remains advantageous. Urban locations provide easier access to talent pools and reliable supply chains for parts and equipment.
• Risk profiles: Risk profiles help identify some red flags that could prevent a transaction or downgrade the land value for data centers. Key considerations include flooding, chemical plants, hurricane-prone regions, wildfires, water stress and drought, wetlands, and biodiversity impacts.
• Power availability: Reliable access to power, including renewable energy, is critical and often a deciding factor in site selection.

Power availability: the major challenge

While finding available space might be an issue in the data center industry, finding available power has emerged as perhaps the main issue. Data centers consume about 1% of the world’s total electricity usage, with larger economies like the US, China, and the European Union seeing this figure rise to approximately 2-4%. This demand has led some municipalities and utilities to impose temporary moratoriums on solving power issues, whether from power availability or the availability of their distribution lines.

The good news is that some utilities are getting ready for AI by investing not only in power but also in green energy solutions. A prime example is Dominion Energy, the largest power supplier in Northern Virginia. In collaboration with Ramboll, a 2.6 GW coastal Virginia offshore wind project was developed and engineered, a groundbreaking effort to integrate renewable energy into the grid supporting the world’s largest concentration of data centers.

Identifying the right location for a data center is not merely about luck or chance. A comprehensive site risk assessment is essential to evaluate potential hazards and constraints. Once the risks have been identified and mitigated, securing a power agreement becomes a critical next step to enhance the site’s appeal to data center providers.

Power agreements: what you need to know

Now that you’ve navigated red flags and addressed the critical site selection criteria, you’re ready to make your land more attractive to data center providers. Securing a power agreement is a vital next step. But securing one is anything but simple.

To begin, you’ll need to enter the queue by submitting the necessary forms and a proposal to the utility provider. Simply requesting a large amount of power, such as 250 megawatts, without a clear justification is unlikely to be accepted. Utility companies will assess the request and expect a solid business case to support the need for such power. A vague or unsupported request will push your project to the back of the line, and it may take six months to complete.

This is where expertise matters. Since the project will become a high-energy user, negotiating terms, redundancy, and backup will be essential. Consultants like Ramboll can help develop a conceptual design for the land being considered or already invested in.

Once the permit is obtained, the land will be viewed differently compared to other developments. It can then be offered to data center providers, with a clear understanding of the available power on day one and the projected power capacity by the time the site or campus is fully developed.

What’s next?

The next step is to put your land on the market. To further its attractiveness, consider investing in a substation. Building a substation can take one to three years, but it can attract co-location providers or hyperscalers since they’ll need over a year to build their data center site.

Can I build the core/shell?

While it hasn't always been common, offering a core and shell for rapid deployment has become increasingly attractive in today’s data center market. Time is money, and with the rapid expansion of the market, the demand for available space and power is becoming the new standard.

This shift is driving the trend of bitcoin mining facilities looking to convert into AI data centers. These sites often have the available power but need the right redundancy to appeal to providers.

Conclusion

The demand for data centers continues to skyrocket, driven by AI, remote work, and ever-increasing data consumption. As a result, acquiring the right land and securing the necessary infrastructure is becoming more crucial than ever.

While finding the right piece of land might seem simple, the complexities of power availability, risk mitigation, and competitive positioning make it an intricate process. By understanding the specific needs of data center providers, such as proximity to key resources, sustainable water usage, and power agreements, land developers can play a pivotal role in shaping the future of this rapidly growing industry.

Though data centers are driven by cutting-edge technologies, their success begins with the land and the careful planning behind them. The best is yet to come.

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