Beware of Data Center Speculators: Trust and Relationships Are Everything

Data center projects are complex. They require an understanding of commercial real estate, capital investment, utility infrastructure, power distribution, construction and mechanical equipment, not to mention IT equipment. This complexity, in combination with the demand for capacity generated by AI adoption, is precisely why we are seeing so many underdeveloped data center projects today. According to recent data center trends report from CBRE, market vacancy is at a record low: 1.6%. Speculators are clamoring to make money on unmet demand for space and power when they have no prior experience developing data center sites. This race leaves potential customers and utility companies to discern what proposals are real and which will never come to fruition.

Mounting Unmet Demand Attracts Inexperienced Hopefuls

Based on their communication with Dominion Energy, Data Center Frontier concluded that there is a 50 GW+ demand for power in Virginia and that 90% of this demand is likely speculative. Developers are searching for data center land sites and making power capacity claims long before they have confirmed they can acquire the power, water, and network connectivity needed to bring such a project to fruition. Across the U.S., utility providers are seeing a flood of data center proposals that will never be built.

We’ve seen this situation firsthand in Northern Virginia, the “Data Center Capitol of the World” where a developer approached us at a conference. He had acquired a site in Virginia that we know has access to 8 MW of power and no existing fiber connectivity, and they said they were planning to scale up to 100 MW by the end of this year. Our experience, industry relationships, and infrastructure resources, enable us to understand that this is impossible, but most businesses don’t have this level of knowledge. This knowledge gap leads to us hearing horror stories from potential customers about being offered data center space that is never ready, or worse, “vacant office space with plenty of outlets and extension cords.”

Power promises aren’t the only problem facing businesses seeking data center space. Inexperienced developers often don’t realize that computing equipment requires mechanical infrastructure, water, and back-up power, let alone the time it can take to source equipment in a market with such high demand. In today’s ecosystem, it can take about 24 months to get a generator and a whopping seven years to process a request for power without existing relationships with utility providers.

Because demand is outpacing supply, companies that seek data center space and power may find themselves vetting new developers and solution providers. Evaluating data center solutions alone involves complex evaluation and due diligence. Unfortunately, this task is now even more complex as technology managers and site selection teams have to weed out developers’ dreams from reality.

Know Your Blind Spots

Successfully developing a site or deploying equipment within a reasonable timeframe to meet business objectives requires expertise in multiple fields, including energy, mechanical equipment, construction, real estate, and investment. When evaluating a potential solution provider, find out if the company’s leadership has a history of delivering data center space and power to technology customers. For example, a developer may understand the local energy market or have a relationship with a utility company, but this does not mean they understand how power distribution works. It’s essential to know what combination of expertise is needed to bring a project to completion and recognize blind spots. When evaluating a potential solution partner, inquire about their experience with:

• Real estate acquisition (whether you’re buying or leasing)
• Investors or project funding
• Utility providers
• Power distribution, redundancy, and management
• Data center operations (mechanical equipment)
• Data center design and construction (if building or modernizing an existing site)
• Community stakeholders (if building)

We Tell It Like It Is

Raeden vets sites and developers so you don’t have to. We have a team of real estate veterans and relationships with investors that allow us to quickly acquire viable properties for our clients. We also have a solutions engineering team with decades of data center development and operations experience. Together, Raeden’s teams proactively evaluate site/building infrastructure and design of existing real estate assets. Based on the customer solution requirement Raeden will align customer needs with a chosen asset and supply and install equipment according to client specifications. Then Raeden will operate the site going forward. We can do all of this faster than current industry standards for RFS timelines.

Raeden’s leadership has more than 20 years of experience evaluating, adapting, building and operating data centers. The team was in this business before the data center “gold rush” and have the relationships and knowledge to get companies what they need to implement their AI or enterprise IT strategy. When companies come to Raeden with an infrastructure challenge, we find viable properties when no one else can, and we provide the hard facts about the site and the possibilities.

We don’t sugarcoat the truth or say we can provide a megawatt of power without verification from energy providers. Readen has relationships with power company engineers, enabling us to get a response on power capacity without a lengthy process. Our relationships are built on years of trust from working together on successful projects. Ultimately, successful infrastructure projects come down to knowing who you’re working with and the unique combination of expertise needed to bring a project to completion.

To learn more about how Raeden can meet technology infrastructure needs, no matter the power or density, connect with us at sales@raeden.com.