Top real estate developers are fast becoming powerful brokers

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olek. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. subscription To receive future issues, directly to your inbox.

The sudden increase in demand for data is rapidly creating new commercial real estate sectors – not just data centers, but also so-called quantum real estate and energy-powered land.

The first refers to structures designed to house specialized quantum computers. The latter is land prepared and ready for data center operations, with an emphasis on obtaining a sufficient and reliable power supply. This land must be secured with permits, utility obligations, and the infrastructure necessary to deliver power to the data center.

There are currently about 20,000 acres of powered land under operational data centers around the world. Nearly 40,000 acres of powered land, roughly 2 billion square feet, are needed to support current projections of data center growth over the next five years, according to a new research paper from Hynes, a global real estate investment management firm. This is equivalent to just under three Manhattans or about 1½ times the size of Paris.

Hines, which has been developing data centers for more than 20 years, has pivoted to new business just in the past year. It is now working to secure power and entitlements for high-volume sites. What this means in practice is mapping networks, negotiating with landowners, and providing financial guarantees to network operators, who are now demanding them.

“The challenge is not building walls anymore,” said David Steinbach, global chief investment officer at Heinz. “It’s getting the megawatts to the site.” “Haynes is focusing on this front-end work, making the Earth ready for AI even before the buildings go up.”

Energy-powered land has become an investable asset class, Steinbach said, because energy rights themselves are rare and valuable. Once you secure network connections and permits, you have created a tradable asset with clear demand from large scalers and operators, he said.

The competition for energy-powered land is being led more by technology companies and energy producers than by real estate developers, but Hines clearly doesn’t want to be left behind.

““The smartest capital today isn’t chasing square footage — it’s enabling computation,” Steinbach said, citing Nvidia’s recent deal with Intel to co-develop chips for data centers and personal computers.NvidiaBet on $5 billion Intel “It’s not just a chip deal, it’s a seismic signal that AI infrastructure is the new oil.”

In August, Silver Lake, a global private equity firm focused on technology investing, and Commonwealth Asset Management, a real estate and infrastructure investment firm, announced the launch of a ground-powered platform aimed at developing data centers. The company will deploy $400 million of capital “to assemble a global portfolio of ground-based powered sites strategically located to process scarce key inputs in meeting growing data center demand,” according to a press release.

The platform currently operates in and targets high-growth markets across the US, Canada and the UK, where access to energy is becoming increasingly scarce.

“This investment represents a long-term commitment to not only meet the immediate needs of AI-driven data center growth but also position the company as a leader in the future of digital infrastructure and a one-stop-shop for fast-growing developers and hyperscalers,” Lee Wetlinger, managing director at Silver Lake, said in the release. “Our innovative approach to land and energy solutions, combined with strategic relationships with key energy partners, will enable us to meet the evolving requirements of hyperscalers through a comprehensive and differentiated approach.”

Data center businesses will now have to expand beyond already crowded markets like Northern Virginia and into energy-rich regions of the Midwest and Texas. Haynes’ research paper points to huge opportunities right now in Europe, where supply shortages and growing demand could mean big potential for both developers and investors. It also highlights the Middle East as an emerging market with growing potential as governments there are investing heavily in artificial intelligence, renewable energy sources and grid infrastructure.

This is not to say that this new concept of powered land is not without its challenges, including securing suitable land, managing entitlement processes with local governments, and working with utility providers to obtain sufficient commitments.

“This is not just a technology story,” Steinbach said. “It is the story of a building cycle that reshapes how and where the real estate business evolves for decades to come.”