'The Great Gold Rush': Power-Ready Land Is A Hot Commodity As Data Center Developers Swarm

Discovering land has the infrastructure to supply hundreds or thousands of megawatts of electricity is now like striking oil or hitting the jackpot.

Power infrastructure is significantly increasing the value of some property, bringing owners and developers out of the woodwork to see if their holdings can help meet the insatiable demand brought by hyperscale data centers amid an artificial intelligence boom.

The phenomenon is making a handful of landowners in Texas and other data center hot spots overnight tycoons. Others are paying big bucks to see if their properties can cash in.

“A lot of people in our industry have termed this as the great gold rush of data center land development,” said Ali Greenwood, an executive managing director in Cushman & Wakefield’s data center advisory group. “It does feel a little bit like a commodity.” 

Owners that took a huge risk years ago by investing large amounts of money to ensure their land sites could handle the power load required for data center developments are reaping huge rewards, Newmark Executive Managing Director David Claros said. 

In Texas, many of those investments were made to make way for a rush of crypto miners drawn to the state's relatively cheap energy and lax regulations at the beginning of the decade. 

But as land with access to massive amounts of power runs scarce in major data center hubs like Northern Virginia and Silicon Valley, developers are now rushing to the deregulated utility market of Texas, the state that’s already pulling in some of the largest data center investments in the country.

That includes Stargate, the joint venture of OpenAI, SoftBank and Oracle, which is building a 206-megawatt data center development in Abilene, Texas, with plans to invest $500B in AI infrastructure over the next four years.

Tech firms, developers and governments are pouring money into building the infrastructure needed to support generative AI technology. AI spending is expected to total over a quarter trillion dollars this year and could exceed $1T within three years. 

That's pushed up national data center land prices for parcels of 50 acres or more by 23%, from $4.39 per SF in 2023 to $5.40 per SF last year, according to Cushman & Wakefield.

For power-ready sites in Texas, that number is more like $20 per SF or $800K per acre, Claros said. That compares to about $2,500 to $10K per acre for sites that have not undergone power infrastructure studies.

“The best sites were the guys that two to three years ago, candidly, took a huge bet,” Claros said. “They probably didn’t even buy the site for AI data centers originally. They probably bought it for crypto mining, or they just saw the infrastructure that was in place and had the foresight to be like, ‘This is valuable.’” 

Data centers are dropping big money for power-ready sites everywhere, though not all markets are created equally. Developer Tract reportedly paid $136M for a 2,100-acre parcel in Buckeye, Arizona, last year. In the world’s largest data center market of Northern Virginia, the owner of a 124-acre Prince William County parcel last year sold to Microsoft for $465.5M, more than $3.75M per acre.

Numbers like that have landowners and developers scrambling to conduct studies to see if their holdings might qualify for hefty paydays.

Roxanne Marquis, founder of 8888CRE, has had numerous landowners approach her for advice on selling to a data center developer because they believe their land might be valued at an all-time high. 

“They've been looking at this ugly infrastructure in the middle of their land for years,” she said. “They've been kind of wondering about it.”

Greenwood also gets about 100 calls a week from landowners hoping their property is worthy of cashing in on the data center boom. 

But of those, only three or four are worth exploring further, and those explorations take significant time and funding, she said. 

Owners are having to get in line and shell out more than before to evaluate their sites as states crack down on regulating crypto miners and data center power requests. Meanwhile, transmission companies are scrambling to deal with a growing queue of data center scope requests while also trying to work out how to meet a huge expected surge in demand.

Ideal data center land sites have high-volt transmission lines and substations on the property or nearby, Claros said. A scope study, which can cost $50K to $100K, will determine if it’s feasible to get the amount of power a data center would require to the land, he said.

Infrastructure studies come after that and cost even more, generally between $100K and $300K, though they can hit $1M in places like Chicago, Greenwood said.

They can also take a while. Transmission companies have been bombarded with electricity requests from data centers. During the second quarter of last year, Dallas-based Oncor received requests for 59 GW of new service for data centers by 2030. That accounted for three-fourths of the company’s new demand requests during the three-month period, a 13% year-over-year increase.

Claros estimated that there are currently only 10 to 15 land sites in Texas that meet all standards and have scope and infrastructure studies completed.

Owners of those sites can almost name their price.

“You have so much leverage for that,” Claros said at Bisnow’s Future of Houston Industrial event last month. “[Data center developers are] willing to pay almost whatever for that site just because of the speed to market.” 

Still, a chicken or egg situation exists in some markets, he said. Landowners don’t want to invest in the costs of an infrastructure study without securing a data center tenant, but data centers don’t want to commit to a site without knowing it has the infrastructure they’ll need, he said.

“Where we are today in the market, to not have the [secured electricity] demand makes this type of bet extremely risky,” Claros said. “If you do have the demand, those guys want sites that already have gone through the scope study and the infrastructure study.”

That's a relatively recent development. As transmission companies’ queues of data center evaluation requests stacked up over the past several years, data center developers have become more pragmatic and resource-driven, Greenwood said. Few are still willing to invest in cheaper land to see if infrastructure can meet power demand. 

“The last 24 months has been a wild roller coaster ride as it relates to data center land,” Greenwood said.

Landowners that didn’t get power studies completed early in the game and don’t have a tenant tied to their sites are finding that discovering power capabilities is an uphill battle. Yet devoting the resources to see if a data center site might be feasible is well worth exploring, Marquis said.

“Like striking oil, if they strike electricity over here, [data centers] are going to go with that one first,” she said.