It is indisputable at this point that the future of technology lies in cloud-based, AI-powered systems. These solutions require data centers to operate, and as a result, demand for data capacity has never been higher. For developers, investors, or companies looking to build new data center facilities, selecting the right site is essential to project success.
The location of your data center will impact your energy costs, network speeds, sustainability goals, and the level of your return on investment. Here are some important considerations to keep in mind as you evaluate potential sites.
1. Power Availability
As more data centers come online across the United States and the world, power availability has become the most critical factor in data center site selection. An aging power grid and long interconnection timelines have pushed developers to look beyond traditional data center markets as they seek reliable access to electricity capable of meeting the rapidly growing power requirements of AI and cloud computing.
Even enough capacity to meet a new facility’s needs is not in today’s market. Data centers will inevitably need to scale up as demand grows. Developers can pursue this capacity in a variety of ways, such as utility partnerships, long-term power purchase agreements, or by installing dedicated energy sources.
2. Connectivity
While power might be paramount, no data center can run without reliable connectivity. Data centers must provide low-latency, high-bandwidth services. Establishing this capability requires dense network routes, connections to internet exchange points, and fiber speeds. Markets with robust telecommunications ecosystems tend to attract data center projects—they allow facilities to plug directly into established digital infrastructure.
This does not necessarily mean that secondary markets cannot compete for data center projects, but economic development and political leaders in those areas must ensure access to diverse fiber routes and carrier networks.
3. Water and Climate
Since data centers generate significant heat, they need highly effective cooling systems to keep equipment running at optimal temperatures. This impacts site selection in two ways: water access and ambient temperature. Regions with cooler climates can reduce cooling needs, while access to water supports the cooling systems used in many data centers.
It is important to note that relying on local freshwater sources can create sustainability and regulatory challenges for developers, owners, and tenants. Data center project leaders can address these issues through community engagement initiatives and by establishing functional plans for responsible water use.
4. Natural Disaster Risk
Data center operators steer clear of regions with high exposure to hurricanes, earthquakes, wildfires, or other natural disasters that could cause operational disruptions. Areas with a lower risk of hazardous natural events offer lower insurance costs and allow more uptime, enabling data center owners and tenants to strengthen their business continuity planning and risk modeling.
5. Land Availability
Finding buildable land is becoming more challenging across the entire industrial real estate sector, and data center developers are not immune to the problem. It is not just the size of the land, but also its topography and access to utility and transportation corridors. Data centers also often want room for future expansion, making suitable sites even harder to find.
6. Regulations and Incentives
Ancillary project costs—permits, taxes, zoning, compliance, and so on—may vary widely by region. Some states or regions have economic development organizations and political bodies that actively strive to make markets more friendly to data centers. These areas may offer tax exemptions, streamline permitting processes, or provide other incentives to help data center developers reduce upfront capital expenditures and lower the total cost of ownership for owners and tenants.
Getting Strategic Site Selection Right
Choosing a data center site involves juggling many factors at once, ranging from energy and connectivity to sustainability and community engagement. As the digital economy accelerates and demand for infrastructure rises, finding the right site and bringing it online quickly have become essential for both operators and investors.
“Selecting the right data center site is about far more than just land,” says Frank Crivello, Chairman and Founder of Phoenix Investors. “It is about finding the intersection of infrastructure, connectivity, and resilience. When we work with data center developers, we help them make decisions that stand the test of time and provide long-term value.”
If you are evaluating your next data center or campus build, Phoenix Investors is ready to help. Contact us today to learn how we can help you navigate the complexities of data center site selection and accelerate your project with confidence.
About Phoenix Logistics
Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistics competitors work to win 3PL contracts and then attempt to secure the real estate to support them. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our clients’ needs.
