An introduction to private equity in the data center industry

Ahead of speaking at IMN's Data Centers Private Equity conference, industry leading panelists shared an essential intro to this fast-growing landscape.

10 key takeaways from the Private Equity in Data Centers webinar

1. Power is the Ultimate Site Selection Factor

Data center site selection now follows "power, power, power" rather than traditional real estate's "location, location, location." Without contractually committed power or a clear pathway to power, sites lack viability regardless of other favorable characteristics.

2. Investment Risk Profile Changes Dramatically Across Development Phases

Data center investments transition from high-risk, VC-like opportunities in early land acquisition to infrastructure-grade investments post-lease execution. This transition can happen overnight, creating unique capital sourcing challenges.

3. Supply Chain Constraints Drive Strategic Equipment Decisions

Hyperscale operators have locked up equipment production capacity, but a secondary market exists. 80% of customers choose speed to market over preferred equipment specifications, accepting alternatives for faster deployment.

4. Demand Currently Exceeds Supply by Extraordinary Margins

Major markets are pre-leased through 2026-2027, with demand described as "insane" for any available power capacity. The AI revolution has created unprecedented requirements for high-density workloads.

5. Capital Sources Span the Entire Investment Spectrum

Everyone from individual investors to sovereign wealth funds seeks data center exposure. The capital requirements are so massive they're described as "somewhat insatiable in the near term."

6. Modular and Edge Solutions Are Expanding Market Reach

Containerized and modular data centers can be deployed virtually anywhere, from parking lots to cellular sites, serving IoT, smart cities, and industrial automation applications.

7. Infrastructure Investment Preserves Long-term Value

Hundreds of millions in infrastructure spending (wastewater treatment, utilities, roads) for new campuses creates substantial barriers to exit and helps preserve site value over decades.

8. Lease Quality Improvements Enhance Investment Appeal

Real estate professionals have significantly improved data center lease structures, making stabilized assets more attractive to infrastructure investors and potential buyers.

9. Self-Generated Power Could Reshape Industry Dynamics

Energy companies are developing data centers with dedicated power generation, including nuclear SMRs, potentially reducing grid dependence and opening new geographic markets.

10. Consortium Approaches Will Handle Mega-Campus Takeouts

As individual mega-campuses reach multi-billion dollar valuations, groups of four to five institutional investors writing $3+ billion checks each will likely form consortiums to capitalize these opportunities.

Don't miss the next essential industry conversation:

Data Centers Private Equity West, October 28, Fremont Marriott Silicon Valley, Fremont CA - REGISTER

Data Centres Private Equity Europe, 10 November, Hilton London Tower Bridge, London UK - REGISTER