The capital chasing data centers today is staggering. But as panelists at NAIOP’s I.CON Data Centers conference this week in New Jersey pointed out, the bigger story is what it takes to deploy that capital successfully.
Led by moderator Tyler McGrail, executive managing director, Newmark, panelists were Robert Filley, senior managing director, Institutional Property Advisors; Jonathan Quinn, director, Capital Markets, Panattoni Development Company; and Sara Wayson, head of data centers, U.S., Mapletree.
Forecasts say the United States could add between 80 and 130 gigawatts of new power capacity tied to data center demand over the next several years – requiring an estimated $1.5 trillion to $2 trillion in equity and debt capital.
But despite the flood of money entering the sector, the panel agreed that capital is no longer indiscriminate. Investors, lenders and developers are becoming far more selective about where they place bets, how partnerships are structured, and which projects are truly financeable.
And increasingly, the difference between projects that move forward and those that stall comes down to one word repeated throughout the session: Power.
Just a few years ago, a compelling narrative around a site – future demand, conceptual infrastructure plans, strategic geography – could generate investor interest. Today, panelists said, capital providers want tangible proof in the forms of load studies, utility engagement, water solutions, community outreach, permitting strategies and infrastructure plans.
“If you’ve got a [data center] site, you are now in the infrastructure business,” Filley said.
That evolution is reshaping how projects are underwritten from the earliest stages. Developers are spending six months to a year preparing sites before formally bringing them to market, often investing millions upfront simply to create a credible development story.
Filley described how even private landowners are increasingly pulled into sophisticated early-stage capitalization structures. In some cases, “phase one” equity partners are funding predevelopment work – including power studies, environmental diligence and entitlement efforts – long before a project is ready for institutional capital.
“It’s not a little bit of capital,” he said. “It can be $5 million to $15 million to get to the point where you’re actually ready to go.”
That front-loaded diligence is also changing investor behavior. Historically, many institutional groups waited until projects were fully de-risked – after construction, leasing and utility procurement – before deploying capital. Today, investors are entering much earlier in the process.
“What we’re noticing is a lot of groups are coming to the table even prior to that point,” said Quinn. “They’re willing to take that risk that maybe historically they had shied away from.”
The result is a new generation of partnership models where investors and developers are increasingly working collaboratively through entitlement, utility coordination and infrastructure development.
But that shift can also create friction. As capital providers move upstream into the development process, developers are navigating more negotiation around control rights, milestones and utility risk. Investors want greater visibility into schedules, permitting and infrastructure timelines, while developers are being asked to carry more exposure if utility delivery slips.
“A lot of tenants are starting to take more of an active approach,” Quinn said. “They’re looking to the owner to ultimately take on that utility risk and take on that delay.”
That dynamic is particularly important in a market where timelines continue to stretch. What once qualified as a “quick path to power” has fundamentally changed.
“A quicker path to power two years ago was 12 to 18 months,” said Wayson. “Now, if I can get power in 36 months, then I’ve still got a great site.”
At the same time, tenant demand remains remarkably strong across multiple segments of the market – not just among hyperscalers. Wayson observed that midsize colocation and retail operators are still expanding aggressively, often competing for 20 to 50 megawatts of capacity while hyperscalers pursue much larger deployments.
That demand is also influencing how owners think about long-term portfolio strategy. Existing leases signed years ago are now colliding with today’s infrastructure realities, forcing owners to modernize buildings, secure additional power and reposition older facilities for evolving tenant needs.
In many cases, tenants themselves are becoming capital partners, investing heavily into infrastructure upgrades while seeking longer lease terms to protect those investments.
The discussion also highlighted the growing divide between established data center markets and emerging ones.
Northern Virginia continues to dominate because of its proven ecosystem, infrastructure redundancy and connectivity advantages, said Filley. But as power constraints intensify, developers and investors are aggressively exploring secondary and tertiary markets across the Southeast and Midwest.
“There’s a rush for power,” Filley said. “It’s speed to power.”
Still, panelists cautioned that not every “next market” will succeed.
Panelists agreed that many emerging markets carry risks that are still not fully understood – including long-term political support, taxation structures, infrastructure limitations and community acceptance. That uncertainty is forcing investors to think beyond immediate demand and ask harder questions about long-term viability.
“We’re looking at, ‘What do I see in five years?’” Wayson said. “If for some reason I have a tenant leave, can I release that because it’s still in a market people want to be in?”
The panelists repeatedly returned to flexibility as one of the most important characteristics for success moving forward.
That flexibility may become even more important as financing structures continue evolving and as second-generation data centers create entirely new pricing dynamics across the market, particularly as older infrastructure depreciates and operators compete on cost.
Even so, infrastructure concerns remain front and center, with Filley noting the vulnerability of aging utility systems supporting highly secure digital infrastructure.
Capital and demand remain, the panelists agreed, but the projects that secure financing – and ultimately succeed – will likely be the ones that can demonstrate not only access to power, but also the ability to navigate entitlement risk, utility coordination, infrastructure delivery and long-term operational relevance.
