The United States hosts 43% of the world’s data centers and is looking to host more. The U.S. data center market has become much more complicated in the last two years, and land acquisitions intended for data centers have skyrocketed in the past year alone. The growing complexity of builds stems from the evolving nature of data center requirements.
Data centers are not exactly new, considering that Google opened its first hyperscale data center in 2006. For the last 20 years or more, these facilities have been the backbone of the internet, hosting everything from e-commerce marketplaces to enterprise cloud solutions and providing essential data storage for governments and private entities.
But artificial intelligence (AI) has changed the game by increasing the computing power requirements of these facilities. By comparison, older data centers use about 10 kW per rack, while next-generation AI racks operate at about 370 kW. On top of that, the rapid growth of new AI technologies means that developers and owners need facilities built faster than ever before to keep up with customer demand. Facilities that once took years to build are now being constructed in only a year or two.
Bringing a data center online today is easier said than done when the number of years required for utility interconnection timelines in some regions is flirting with double digits. That means that every choice, from site selection to suppliers, logistics and transportation providers, and general contractors, must be on point if stakeholders hope to go live and take advantage of the current market demand. Here’s what you’ll need if you hope to bring your data center to market quickly.
Winning Strategies for Data Center Site Selection
Power demand for data centers is expected to grow at about 16% on a compound annual basis through 2028 as wave after wave of generative AI and agentic AI solutions come to market, accounting for about 60% of all the power demand growth associated with data centers. As it stands, most U.S. utilities have found themselves woefully unprepared to deal with this level of power generation amid struggles to upgrade an aging grid.
On top of that, greenfield build sites for data centers are becoming extremely hard to come by. Even when available, the price tag is often cost-prohibitive for many organizations. This leaves a couple of options:
- Adaptive reuse. Many developers and builders have found success converting empty commercial properties from underutilized asset classes into data centers. This strategy has been especially popular among office properties, which have struggled to fill vacancies since the pandemic-era popularization of distributed and hybrid work strategies.
- Brownfield development. Brownfield sites are not without challenges (environmental cleanup, refurbishment, demolition, etc.) but offer significant appeal as data center sites due to their existing utility infrastructure, usable buildings or foundations, streamlined permitting, and generous square footage.
Data Center Build Logistics in an Era of Supply Chain Disruption
When considering factors like interconnection timelines, chip shortages, community feedback rounds, and permitting approvals, data center planners have enough delaying elements to contend with. Logistics shouldn’t be one of them.
The components required for modern data centers are largely interconnected. IT hardware, cooling systems, electrical systems, turbines, and other equipment must all be installed carefully and in a specific order at precise points of the construction process, which means a delay in one shipment can throw off an entire build timeline.
As such, the logistics provider in charge of coordinating and transporting these deliveries must have experience in data center construction logistics, which means they need to:
- Coordinate the delivery of components on precise schedules.
- Know how to protect highly sensitive components during transport and storage.
- Handle customs and import paperwork for equipment and components shipped from around the world.
- Stage deliveries so they don’t take up unnecessary space on the build site until they are needed.
- Get involved early in planning to offer insight into how logistics will impact the timeline.
A Builder That Knows Data Centers
Data centers have extremely precise requirements that not every general contractor can handle. Even if a builder has experience with warehouses, factories, and other industrial facilities, that doesn’t necessarily qualify them to build a data center.
At a minimum, you’ll want to look for contractors that have:
- High safety standards
- Proven strategies for providing skilled labor for the build
- Specialized knowledge of data center cooling systems and power infrastructure
- A portfolio of completed data center projects
- Strong communication and collaboration skills
- A good track record for achieving community and permit approvals
- A sustainable mindset
- A network of transportation, logistics, and real estate providers
Phoenix Investors offers an entire network of companies experienced in data centers, allowing us to provide initial planning and site selection support, expert construction logistics and transportation support, and an excellent-quality final renovation or build that meets your time requirements. For more information about how we can help you bring your data center design to life, please contact us.
About Phoenix Investors
Founded by Frank P. Crivello in 1994, Phoenix Investors and its affiliates (collectively “Phoenix”) are a leader in the acquisition, development, renovation, and repositioning of industrial facilities throughout the United States. Utilizing a disciplined investment approach and successful partnerships with institutional capital sources, corporations and public stakeholders, Phoenix has developed a proven track record of generating superior risk adjusted returns, while providing cost-efficient lease rates for its growing portfolio of national tenants. Its efforts inspire and drive the transformation and reinvigoration of the economic engines in the communities it serves. Phoenix continues to be defined by thoughtful relationships, sophisticated investment tools, cost-efficient solutions, and a reputation for success.
Mr. Frank P. Crivello began his real estate career in 1982, focusing his investments in multifamily, office, industrial, and shopping center developments across the United States. From 1994 to 2008, Mr. Crivello assisted Phoenix Investors in its execution of its then business model of acquiring net lease commercial real estate across the United States. Since 2009, Mr. Crivello has assisted Phoenix Investors in the shift of its core focus to the acquisition of industrial real estate and data center assets throughout the country.
Given his extensive experience in all aspects of commercial real estate, Mr. Crivello provides strategic and operational input to Phoenix Investors and its affiliated companies.
Mr. Crivello received a B.A., Magna Cum Laude, from Brown University and the London School of Economics, while completing a double major in Economics and Political Science; he is a member of Phi Beta Kappa. Outside of his business interests, Mr. Crivello invests his time, energy, and financial support across a wide net of charitable projects and organizations.