Three Site Selection Considerations for Data Center Development
Determine whether a site is a prime data center opportunity before building
According to an August 2022 article by GlobeNewswire, approximately 2,825 MW of power capacity will be added to the data center market in the next five years. The same report forecasts the U.S. data center construction market to reach $25 billion by 2027. While the need for data centers continues to increase, finding a suitable property with the right zoning, utilities, and development timeline can be challenging. The following three site selection considerations can help owners and developers determine whether a site is a prime data center opportunity.
1. Availability of essential utilities
Power, fiber, and water are essential to data center operations and may limit speed to market if they are not readily available. When assessing utility availability for a potential site, consider the following:
- Data centers need power, and they need it fast. Generally, a large site requires upgrades to the existing power grid and its own substation to supply current. If an end user can control the variable of power by adding a substation, it can help them get to market more quickly.
- Fiber optic infrastructure continues to improve and is generally located in many places that are already heavily developed. If fiber is not available at a potential site, however, it could be a simple and cost-effective process to bring fiber where it is needed — so long as there is available space in the public right-of-way to install the new fiber. Often, a shorter path for the new fiber passes through privately owned parcels. To use this path, easements must be obtained from the owners, which be a time-consuming process.
- In addition to power and fiber, data centers draw a significant volume of water to cool server racks and equipment. As municipality interest in green initiatives rises, using reclaimed water is a great option that can save up to millions of dollars over potable or domestic water.
2. Clarity of the zoning ordinance
Many local land development codes lack clarity regarding data centers, which can slow a project’s progress. Many ordinances do not specifically address data centers, and the assets sometimes fall under the less desirable “industrial” category. However, even if a potential property sits in an ambiguous zone, there could be a simple fix.
- The property could be rezoned — in as little as three months in some locations — to a zone that allows data centers. With this approach, developers don’t necessarily have to state publicly their intention to build a data center, often making it easier to obtain approval.
- Another option is to apply for a special exception to allow data centers. However, applying for a special exception makes it clear that the property will be a data center. Depending on the jurisdiction, developers may be required to send notifications to adjacent property owners, which could result in objections
The key is to work with a site civil engineering consultant and land use attorney who can help determine zoning needs and keep the project moving to hit the end delivery date.
3. Property size and location
Data center tenants generally need to build two buildings on a site to take advantage of efficiencies in utilities and security. This means a feasible site size is approximately 40 acres at a minimum, though some developers and tenants could be interested in much more. Without needing to access major roadways, data center developers may consider nontraditional locations, but data centers must be designed to cope with the unexpected. They generally are more likely to be impacted by natural effects, like flooding.
When it comes to geographical location, Northern Virginia still dominates the market. Submarine fiber cables in Virginia Beach are making the I-95 corridor attractive for data centers. However, the high cost of land in Virginia is leading developers to markets like Atlanta, Ohio, Texas, and parts of New Jersey.
Tools for developers
Through each of these factors, there are several things that are available to developers to help move data center projects forward. Taking advantage of these benefits could save developers time and money.
- Tax incentives vary by state and locality and can depend on the number of jobs created, equipment used, or amount of money invested.
- Overlay districts are a regulatory tool where jurisdictions specify additional restrictions or allowances in addition to the underlying zoning district rules. These can make approvals easier (while also restricting available locations).
- Fast-track programs offer priority reviews for projects likely to have a significant impact on the tax base.
- Advance permits for site clearing allow a developer to begin clearing a site before a detailed design is in place, speeding up the construction timeline.
This article was originally posted on www.missioncriticalmagazine.com.
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