Owning a data center isn’t just about finding a plot of land and constructing a building—it’s one of the most capital-intensive, infrastructure-dependent asset classes in commercial real estate. If you’re serious, you’ll need 50-100+ megawatts (MW) of power, a fresh water supply, and at least three years just to navigate permitting, approvals, and site readiness before you even break ground.
Why Does It Cost So Much?
The average cost to develop a data center runs around $3,000 per square foot, and here’s why:
• Power Infrastructure – Data centers are power-hungry. A single large-scale hyperscale facility can consume as much electricity as a small city. Upgrading transmission lines, substations, and transformers can add hundreds of millions to development costs. In many markets, securing enough power can take years, especially with utility providers struggling to meet demand.
• Cooling Systems – High-performance servers generate massive heat loads. Data centers require advanced cooling solutions, from chilled water systems to direct liquid cooling. Water-cooled systems alone can use millions of gallons annually, requiring sites near stable water sources or alternative cooling strategies.
• Security & Redundancy – Unlike standard commercial buildings, data centers need 24/7 security, biometric access controls, and multiple layers of redundancy to prevent downtime. That means backup generators, UPS battery systems, multiple fiber routes, and disaster-proof construction to ensure uninterrupted operations.
• Land Costs & Zoning – Finding a site with the right zoning, fiber connectivity, and access to large-scale power is difficult. High-demand regions—Northern Virginia, Dallas, Phoenix, Chicago, Atlanta, and Silicon Valley—are seeing skyrocketing land prices as data center operators compete for limited parcels.
Who Are the Major Players?
The biggest names in data centers fall into two categories:
- Hyperscalers – Tech giants like Amazon Web Services (AWS), Google, Microsoft, and Meta build their own data centers to support their cloud services and AI infrastructure. These companies dominate global demand and often negotiate directly with utility providers to secure long-term energy contracts.
- REITs & Colocation Providers – Companies like Equinix, Digital Realty, CyrusOne, QTS, and CoreSite own and operate multi-tenant facilities where businesses rent space instead of building their own data centers. These REITs focus on high-density markets and charge premium rates for scalable infrastructure.
How Long Does It Take?
From site selection to full operations, a greenfield (ground-up) data center can take 3 to 5 years to complete, depending on power availability, permitting, and construction timelines. Retrofitting an existing industrial building into a data center might shorten the process to 18-24 months, but the site must still meet strict power and connectivity requirements.
The Bottom Line
The demand for data centers is at an all-time high, driven by cloud computing, AI, and edge computing. But the barrier to entry is massive. Without significant capital, utility agreements, and a deep understanding of infrastructure, most investors are better off partnering with established players.
If you think you have a site that might work, let’s talk.