Data Center Real Estate: Opportunities for CRE Professionals
- Craig Kaiser
- Aug 7
- 8 min read
The rapid evolution of technology has created a new horizon of opportunities for commercial real estate (CRE) professionals. Data centers, a key pillar of the digital economy, epresent one of the most exciting and lucrative niches in the sector. The surging demand for cloud storage, artificial intelligence (AI) applications, and digital transformation has propelled data centers into the spotlight, offering CRE experts a chance to carve their niche in this booming market. This resource examines the growing demand for data centers, the specific real estate requirements they entail, market trends, and practical strategies for CRE professionals to thrive in this rapidly growing space.
The Growing Demand for Data Centers
Data centers are specialized facilities designed to house critical IT infrastructure, including servers, storage systems, networking equipment, and other computing resources. These data centers serve as the backbone of modern digital operations, providing the processing power and storage capacity required to support a vast range of services, from cloud computing and AI applications to streaming platforms and e-commerce operations.
Typically equipped with robust cooling systems, advanced power management, and stringent security measures, data centers ensure the reliable and continuous operation of essential digital services. Their scalability and efficiency make them indispensable in an increasingly digital and interconnected world. According to LandGate, as of February 2025, the total investment in AI and Data Center Infrastructure development in the U.S. has surpassed $2.5 trillion, and could exceed $6 trillion by 2030.
Data Center Real Estate: Opportunities for CRE Professionals
Once a specialized corner of industrial real estate, data centers have rapidly emerged as one of the fastest-growing asset classes in the U.S. commercial property market. The increasing reliance on cloud computing, AI applications, and digital services ensures that demand for data centers will only continue to grow, offering tremendous opportunities for commercial real estate investors, developers, and brokers alike to become indispensable partners in the development, leasing, or management of these critical facilities.
Drawn by strong returns, long-term leases, and market demand, CRE professionals are increasingly focusing on data center properties. Activities like site selection, development, leasing, and financing are gaining traction. By applying their skills in location analysis, infrastructure, and tenant relationships, they’re adapting to the unique demands of data centers. Whether developing new facilities or brokering deals for existing ones, data centers offer lucrative opportunities for those ready to navigate their technical and logistical complexities.
If you own, manage, or represent a commercial property and want to know if it’s suitable for a data center, LandApp can help. Simply locate the parcel on our map to receive a free LandApp Property Report. This report evaluates your property’s suitability for data center development using our Value Index Scores, rated on a scale of 0 to 100. Key factors such as proximity to power, fiber connectivity, environmental conditions, and zoning are all taken into account. Once you’ve accessed your free Property Report, you can list the property for lease or sale specifically for data center development on LandApp's marketplace at no cost. Connect directly with data center developers, receive offers, and explore opportunities without any obligation to accept.
Top Regions for Data Center Development for CRE Professionals to Watch
Virginia continues to lead as the top state for data center development in the U.S., cementing its dominance in the industry. At the same time, markets like Phoenix, Atlanta, and Dallas are experiencing rapid growth. However, despite this expansion, both primary and secondary data center markets face a persistent supply-demand imbalance. This has resulted in a shortage of co-location space and escalating costs, presenting significant challenges for data center developers.
What is the Ideal Location for a Data Center?
Data centers are no ordinary commercial properties- they have highly specialized needs that set them apart. Commercial real estate professionals should understand the land qualifications for data centers, which include having at least 40+ acres of land or a vacant building and being located near energy infrastructure and fiber lines.
1) Property Size
Smaller data centers typically operate within buildings spanning 5,000 to 10,000 square feet. In contrast, large-scale enterprise and hyperscale data centers far exceed these dimensions, sometimes covering up to 300 acres. Modern 40+ megawatt data centers usually require a minimum of 10 acres, though 40 acres or more is often preferred for optimal functionality and future scalability.
2) Location
When it comes to choosing a suitable property for a data center, location is everything- just as it is with any other type of real estate. The ideal location is determined by several key factors, including strong connectivity, proximity to large population centers, favorable tax incentives, access to affordable and reliable power, minimal risk of natural disasters, and direct availability of renewable energy. Each of these elements plays a vital role in ensuring the efficiency, sustainability, and long-term success of a data center.
Close Proximity to Electrical Infrastructure: Data centers need power, and they need it fast. Properties near substations and transmission lines are ideal but not essential. Large data centers often require power grid upgrades and building their own substations, which developers are usually willing to invest in. Access to fiber optic infrastructure is also crucial, but its absence isn’t a dealbreaker. Developers can install new fiber fairly easily and cost-effectively, as long as there’s space in public rights-of-way. However, shorter routes may cross private land, requiring easements from owners, which can take time.
Zoning: Zoning ordinances play a crucial role in assessing whether a property's location is suitable for a data center. Unfortunately, many local land development codes lack clear provisions for data centers, which can create obstacles for project approval. In many cases, data centers are not explicitly mentioned in these ordinances and are instead grouped under the less ideal "industrial" category. However, rezoning offers a viable solution, though the process typically requires 3 to 6 months to complete.
Physical Characteristics of Land for Data Centers: Data centers need flat, open spaces for construction. Steep slopes or densely wooded areas are usually unsuitable. The site must allow space for the building, parking, and landscaping. Properties with existing vacant commercial buildings can be ideal, as developers can repurpose the infrastructure for data center use. Many modern data centers are former factories, highlighting the potential for adaptive reuse in this industry.
Environmental Concerns: Environmental factors like flood zones, wetlands, and habitats for endangered species can present significant challenges when developing a data center on a specific site. Addressing these complexities is essential to protect the environment while ensuring the safety and efficiency of the facility's operations. For example, identifying wetlands early in the planning process can help mitigate risks and guide responsible development.
3) Water Access
Access to water is essential for data centers, as it helps cool servers and computing equipment through liquid cooling. According to NPR, the average data center uses about 300,000 gallons of water daily, which is equal to the water usage of 100,000 homes. Many data centers rely on on-site water to dissipate heat from IT equipment, highlighting their significant water demands.
Data Centers & Commercial Real Estate: Challenges & Outlook
The data center market offers tremendous opportunities in the realm of commercial real estate, but it also comes with significant challenges. High energy consumption, regulatory complexities, and the growing demand for sustainable practices are key obstacles facing the industry. To address these concerns, leading developers are adopting innovative solutions such as integrating on-site solar power, utilizing recycled water systems, and leveraging modular or prefabricated designs to minimize carbon footprints. Here’s what commercial real estate professionals and investors should know:
Data Centers are a Specialized Asset Class: Experienced real estate investors know that data centers are a specialized asset class requiring unique expertise. Unlike traditional properties, data centers sit at the crossroads of real estate, power engineering, fiber connectivity, and hyperscale computing. Misjudging tenant needs can mean the difference between a thriving investment and an under-performing asset. To succeed in this complex market, it’s essential to work with seasoned partners who understand the sector’s technical and operational demands.
Some Properties are Better Than Others: Much like how Amazon transformed logistics and retail real estate, AI hyperscalers are reshaping the landscape of data center demand. While demand is strong, it is highly location-dependent. Data centers with access to affordable, reliable energy and close proximity to major network hubs are poised to outperform the competition.
Not all Data Center Investments are Created Equal: Not all "data center" investments are truly what they claim to be. Some brokers misuse the term, applying it to industrial buildings that lack the essential infrastructure needed to support real tenants. Without adequate power capacity, cooling systems, and fiber connectivity, these structures are little more than oversized warehouses.
Technology Updates are Crucial: In the data center sector, the greatest challenge isn’t vacancy, like other types of commercial properties- it’s obsolescence. As technology advances rapidly, facilities that fail to accommodate higher-density computing or adopt modern cooling technologies quickly lose their competitive edge. Adaptability is key!
FAQ's About Data Centers for CRE Professionals
Understanding data centers can be complex, especially for commercial real estate professionals navigating this unique asset class. To help simplify the subject, we've compiled answers to some of the most commonly asked questions below.
What Zoning is Required for a Data Center?
Data centers typically require industrial or commercial zoning, though the specific requirements vary by location. In some areas, they fall under general industrial zoning, while others assign them unique categories due to their distinct traits, such as high energy consumption and low employment density. If existing zoning isn't suitable, rezoning can provide a solution, though the process usually takes 3 to 6 months to complete.
Do Data Centers Increase Property Values?
Data centers can increase property values, but there are complex circumstances that can affect this, offering both advantages and challenges. Data centers can boost demand for housing and raise property values in nearby areas because they create jobs, drive economic growth, and increase tax revenue for municipalities. However, they may be viewed as less desirable neighbors due to concerns about noise, environmental impact, and their often imposing visual presence.
How Much Do Data Centers Pay for Land?
Tech giants such as Google, Microsoft, Amazon, and Meta are locked in a fierce race to secure prime real estate for their data centers. These companies often pay premium prices for sites equipped with reliable power infrastructure and high-speed fiber connectivity, which are critical components for their operations. In highly competitive areas that offer abundant power, water resources, and fiber access, developers are often willing to pay up to 50% above the typical market value for land. Factors like location, infrastructure quality, zoning regulations, and land size play a significant role in driving these higher prices.
Do Data Center Developers Lease or Buy Property?
Data center developers typically choose between leasing or purchasing land for their facilities, though outright ownership is often preferred. Owning the property provides greater control over operations, zoning compliance, and opportunities for future expansion. However, the decision to lease or buy hinges on factors such as available capital, risk tolerance, and project-specific requirements. For example, developers with limited budgets may opt to lease to reduce upfront costs, while those prioritizing long-term stability and control tend to invest in purchasing land. Ultimately, the choice reflects a strategic balance between financial constraints and operational objectives.
How to Analyze the Potential of CRE Properties for Data Centers & Attract Developer Interest
If you represent, own, or are managing a commercial property and are interested if it could be suitable for a data center, get a free LandApp Property Report by finding the parcel on our map. The Property Report will rate the property's suitability for a Data Center within our Value Index Scores on a scale of 0 to 100 by evaluating key factors such as proximity to power, fiber connectivity, environmental conditions, and zoning. After getting your free Property Report, you can list the property for lease or for sale for data center development specifically for free on LandApp's marketplace to connect with data center developers and receive offers, none of which you'd be obligated to accept:
If you'd like to create unlimited property reports to assess the suitability of parcels nationwide for data center development, subscribe to LandApp Pro for $6 monthly: