Major real estate developers are fast becoming power brokers

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and emerging opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. become a member to receive future editions straight to your inbox.

The surge in data demand is rapidly creating new commercial real estate sectors; not only data centers, but also quantum real estate and powered land.

The first refers to structures designed to house special quantum computers. Second, the land is prepared and ready for data center operations, focusing on obtaining a reliable and sufficient power supply. This land will need to be secured with the permits, service commitments, and infrastructure required to power a data center.

There are currently approximately 20,000 acres of electrified land under operational data centers worldwide. Nearly 40,000 acres, or almost 2 billion square feet, of powered land are needed to support current projections for data center growth over the next five years, according to a new research paper from global real estate investment manager Hines. That’s just under three Manhattans, or about 1.5 times the size of Paris.

Hines, which has been developing data centers for more than 20 years, turned to a new business last year. Now secures power and authority for hyperscale sites. What this means on the ground is mapping networks, negotiating with landowners and now offering financial guarantees to grid operators who request it.

“The challenge is no longer to build the wall. It’s to deliver megawatts of energy to the facility,” said David Steinbach, Hines’ global chief investment officer. “Hines focuses on this front-end work, making the land AI-ready before the buildings even go up.”

Because power rights are scarce and valuable, electric land has become its own investable asset class, Steinbach said. “Once network connections and permissions are secured, you create an asset that is fungible with open demand from hyperscalers and operators,” he said.

Competition for electric land is being driven by technology companies and energy producers rather than real estate developers, but Hines clearly doesn’t want to be left behind.

““The smartest capital today is not about chasing square meters, but about enabling computing,” Steinbach said, referring to Nvidia’s recent agreement with Intel to co-develop chips for data centers and personal computers.Nvidia5 billion dollar bet Intel “This isn’t 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 investment, and Commonwealth Asset Management, a real estate and infrastructure investment firm, announced the launch of a robust land platform targeting data center development. According to a news release, $400 million in capital will be deployed “to build a global portfolio of strategically located strong land holdings to meet the essential scarce input in meeting the growing demand for data centers.”

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

“This investment represents a long-term commitment to not only meet the immediate needs of AI-driven data center growth, but also to position the company as a leader in the future of digital infrastructure and a one-stop shop for fast-growing developers and hyperscalers,” Lee Wittinger, Silver Lake’s chief executive, said in the statement. he said. “Our innovative approach to land and energy solutions, combined with strategic relationships with key energy partners, will enable us to meet the evolving demands of hyperscalers with a holistic, differentiated approach.”

Data center hubs will now need to expand beyond already crowded markets like Northern Virginia and into energy-rich regions in the Midwest and Texas. Hines’ research paper points to huge opportunities in Europe right now; Here, insufficient supply and increased demand can mean huge potential for both developers and investors. It also highlights that the Middle East is an emerging market with growing potential as governments invest heavily in artificial intelligence, renewable energy sources and grid infrastructure.

That doesn’t mean this new electric land concept is without challenges, including securing suitable land, managing authorization processes with local governments, and working with service providers to obtain adequate commitments.

“This is not just a technology story,” Steinbach said. “This is the story of a construction cycle that is reshaping how and where the real estate business will evolve for decades to come.”