We had the opportunity to chat with some of the leading owners and builders of data centers space today on our Data Centers Task Force group meeting. Fascinating and fun conversation with Aaron Binkley of Digital Realty and David Hall and David Sitkowski from Clune Construction Company.
Some key take aways from the conversation:
– multiple new entrants into the data center space are putting pressure on rents (upward) with a lot of venture capital funding the new entries
– Increased focus by Owners (and customer/users) on renewable energy with an understanding that the renewable energy is cheaper but NOT Free.
– Energy markets remain a bit volatile for renewable energy with federal tariff on solar panels continuing to negatively impact supply
– Climate related reporting from the EU taxonomy, Singapore and potential SEC proposed rules creating a continued ESG focus by owners and customers in the Date Center space
– Supply chain issues continue to negatively affect delivery times and cost – causing consternation but opportunity as well
– Noting generators are taking in certain locations over 72 weeks for delivery and switch gear breakers taking over 16 months for delivery from the normal 6 months
– Labor Shortages continue in various markets delaying jobs – e.g., Pacific NW on carpentry and Phoenix on electricians and other trades
– Deals continue to increase in size and scale despite increased need for local based service of smaller scale
– Increased cooperating and sharing of work pipeline to enable design and build on time
– increased federal work in the data center site space
– increased interest by customers in LEED and Energy Star certifications but not everywhere
– increased interest in power coming from solar and wind sources both on site and off site through power purchase agreements (e.g., in VA, TX, CA, Illinois and NJ)
– customers and employees continuing to ask about sustainable features in buildings and in power supply and other areas of design
– Communities are beginning to wake up to data centers and in certain locations object to their noise and power consumption, noting the lack of traffic and school impacts given their use
– Water is becoming more and more relevant to the conversation and how water is or is not used in cooling systems (noting – Digital Realty does not use water in its cooling solution but towns where they operate are starting to ask about this resource)
– Permitting for generators which used to be relatively easy to obtain is now starting to get a bit trickier and harder to get on an over the counter baiss given potential air quality issues and diesel for generator issues – resulting in additional time for development permits
– Site Selection – certain jurisdictions with a high amount of data centers are beginning to increase real estate taxes for the data center user/owner which will likely, in turn, have these owners focus on other locations which are not so pricey by way of taxes.
From the Cloud – on balance, labor shortages, supply chain and increased focus by customers on ESG is driving various changes to design and build in the data center space to ensure timely and on budget deliveries. While supply chain issues should clear up in Q4 to Q1 of 23′, the focus on ESG should continue well into the future as more and more customers are adopting GhG reduction targets and more and more owners follow the lead of big industry players like Digital Realty and Prologis.
Duane Morris has an active Data Centers Team as well as an ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your data center project and your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project with you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Jeff Hamera, Joel Ephross, Robert Montejos or David Amerikaner or the attorney in the firm with whom you in regular contact.or the attorney in the firm with whom you are regularly in contact.