The New Data Center Playbook | Chapter 3: Ground Control: Structuring Land Deals for Data Center Development

Historically, data center site selection was driven principally by proximity to customers, availability of suitable land, connectivity and planning considerations. Those factors remain important, but the development of AI and unprecedented demand for compute capacity have fundamentally altered how investors, developers, and operators evaluate opportunities. Site selection has become a far more complex exercise involving regulatory considerations, data sovereignty requirements, power, water and other infrastructure availability, environmental constraints, community acceptance, supply chain resilience, and access to capital. Governments are taking a more active role in shaping digital infrastructure, and capital is moving earlier in the development lifecycle.

The result is a new location equation. Successful projects are no longer determined simply by finding the right parcel of land. They require the alignment of infrastructure, regulation, customer demand, planning and environmental deliverability, social license and investment capital. The most attractive sites are those where these factors can be assembled into a deliverable and scalable development platform.

A new data center site selection framework

Data center site selection starts with understanding the intended workload. Different facilities have fundamentally different requirements. Edge and latency-sensitive applications still prioritize proximity to users, fiber networks and major exchanges. By contrast, AI training clusters and sovereign compute platforms can often tolerate greater distance from end users if they gain access to the infrastructure needed to support high-density computing.

As AI becomes a strategic national priority, regulatory frameworks are becoming one of the key differentiators between markets. Planning and regulatory considerations now sit at the heart of location strategy. Around the world, governments are increasingly using planning policy, permitting frameworks, infrastructure investment and incentives to influence where digital infrastructure is developed. In some markets, authorities are accelerating deployment in selected areas through planning support, infrastructure funding and access to land. In others, environmental concerns, resource constraints and community opposition are leading to tighter controls. In some markets, accelerated deployment quickly moves toward tighter controls, driven in large part by community concern and opposition.

Why power availability has become the defining constraint for data center development

While location decisions are influenced by multiple factors, power has emerged as the dominant constraint, following water supply, and social opposition, in many established markets.

The challenge is identifying land that can be energized with firm power within the required timeframe. Access to power increasingly acts as the gateway through which all other site-selection decisions are filtered. A location may satisfy customer, connectivity and commercial requirements, but remain unviable if power cannot be delivered.

This reality is reshaping investment decisions globally. Investors are increasingly prioritizing locations where power infrastructure, transmission capacity and planning strategy can be aligned from the outset.

The planning landscape is evolving rapidly across every major market.

Asia-Pacific

• In Asia-Pacific, governments are increasingly linking new data center development to wider economic and sustainability objectives.

• Singapore has used structured programs to allocate infrastructure capacity with government agencies like JTC Corporation playing a key role in land allocation, while Japan is deploying incentives to encourage development beyond traditional metropolitan hubs of Tokyo and Osaka to support resilience and regional growth.

• In India, data centers have been designated as essential infrastructure, with state-level competition for investment through land and other incentives.

• In Australia, the focus on which projects can actually energize has resulted in regulatory reform, queue management initiatives and greater scrutiny of speculative projects. The Federal Government announced, in September 2026, mandatory national standards for large-scale data centers, including the proposition that data centers should bring new clean and firmed generation, pay for the infrastructure that they require, and not put upward pressure on electricity prices for Australian consumers. These reforms are being debated with different views from jurisdictions as to how prescriptive those requirements should be. The New South Wales government has released guidelines which establish six principles covering environmental standards, no net cost to consumers, mandatory funding of new energy and water supply, community benefit-sharing, local content, and workforce development. Proponents that address the principles get a streamlined planning assessment pathway, including a 75-day assessment timeframe.

United States

• In the United States, demand continues to outpace supply, driven primarily by AI workloads, cloud computing expansion and hyperscaler growth, such that industry growth is increasingly extending beyond established clusters.

• Northern Virginia remains dominant, but mounting pressure on power, infrastructure and local communities is driving attention toward Texas, Arizona, Georgia and the Midwest, with greater capacity and planning certainty. This growth creates tension and opportunity.

• For example, in Texas, ERCOT’s “Batch Zero” interconnection process, which was introduced to clear a backlog of over 200 gigawatts of large load requests, is reshaping development timelines. Projects must now meet stricter readiness criteria and demonstrate committed capital, while ERCOT evaluates grid impact and transmission constraints before granting interconnection rights. This more disciplined queue management has created both opportunities and uncertainty for data center developers, who must navigate longer study periods and potential curtailment obligations as the state balances rapid load growth against grid reliability.

Europe

• Europe combines strong demand with increasingly sophisticated sustainability and reporting requirements, while development remains shaped by local planning controls, grid availability and environmental requirements. Spain’s draft rules illustrate the direction of travel: grid access for new data centres of 1 MW or more would be tied to resilience and digital sovereignty, energy and water efficiency, renewable power and disclosure requirements, with non-compliance risking loss of access permits. 

United Kingdom

• The UK offers one of the clearest examples of government recognizing the strategic significance of data centers. Repeated policy statements emphasize the importance of data centers to economic growth and digitalization objectives, borne out by the designation of UK data infrastructure as Critical National Infrastructure. Keen to ensure that the planning system does not delay or block deployment, the National Planning Policy Framework (August 2026) includes stronger support for data centers and their specific locational requirements including electricity network infrastructure. AI Growth Zones are also a relatively new designation, where selected sites can benefit from streamlined planning processes and other stimuli to incentivize development and investment.

• The Government is also contemplating a future national policy statement for data centers and potentially aligning data center growth with national spatial strategies for energy. These policy changes come alongside more hard-edged legal reforms to speed up consenting processes: it is not mandatory for data centers to take any prescribed consenting route and new flexibility in the system means planning strategy can bend to accommodate the power strategy. 

• Alongside this, reforms to judicial review are being made to minimize the ability of court legal challenges to stall important projects. This may benefit data centers given their heightened socio-political profile and the fact that planning challenges are often the front line for environmental, climate change and anti-big tech lobbyists.

The common theme is clear: governments are no longer passive observers. They are actively shaping where and how digital infrastructure is deployed.

The increasing complexity of data center development is changing the way sites are acquired, funded and developed. Few organizations possess all the ingredients required to identify, secure, power, finance and operate large-scale developments independently. Collaborative models are increasingly important.

Increasingly, the objective is not simply to acquire land. It is to secure the infrastructure rights that make development possible. In power-constrained markets, ownership of grid connections, substations, transmission assets, and related infrastructure can be just as valuable as ownership of the site itself.

Recent transactions illustrate this trend. Tritax has purchased a 74-acre site in West London on which it will be delivering one of Europe's most advanced data center facilities. Tritax is supported by an innovative 50:50 joint venture with EDF, a European renewable power generator. The AI Infrastructure Partnership highlighted a broader market shift toward ecosystem-based investment models that combine capital, technology expertise, power infrastructure and customer demand. Digital Realty's partnership with Blackstone demonstrated how institutional capital can accelerate hyperscale development pipelines.

How site acquisition structures can respond to new conditions

As value shifts from land ownership to infrastructure access, the commercial models underpinning data center development are evolving: 

• Joint ventures and strategic partnerships combine land ownership, development capability, access to power infrastructure, supply chain buying power, operating expertise, and institutional capital, enabling participants to share risk while accelerating delivery.

• In Japan, partnerships with regional utilities and trading houses are common. Across Southeast Asia, local partners often provide land access while international operators contribute technical capability and customer relationships. Careful thought needs to be given to governance frameworks, deadlock resolution, and how contributions of different kinds (land, capital, technical expertise, customer relationships) are valued and protected through the life of the venture, particularly where one party's contribution is front-loaded (e.g. land) while another's accrues over time (e.g. operational know-how and customer revenue). 

• Vendor financing arrangements help bridge the gap between land acquisition and project maturity. Deferred consideration, milestone payments, overage mechanisms and seller loans can reduce upfront capital requirements while aligning seller and developer interests.

Leasing structures 

• Leasing structures are adapting to the ever-evolving data center world. We see build-to-suit arrangements, powered shell deliveries and phased energization schedules becoming standard as tenants seek to de-risk deployment timelines while landlords manage infrastructure commitments. Sale-and-leaseback structures enable operators to recycle capital from stabilized assets into new development opportunities. By monetizing mature facilities while retaining operational control through long-term leases, developers can redeploy capital toward land acquisition, power procurement, and AI-related infrastructure. This model has gained significant traction in mature markets in Asia, where institutional investors such as sovereign wealth funds, Japanese trading houses and REITs are actively acquiring stabilized data center assets and private capital funds around the world are looking strategically at unlocking capital in traditional assets to deploy into strategic critical and digital infrastructure.

• We haven't seen this model widely used in Australia with hyperscalers. This is not surprising, as operators prefer freehold land tenure to maintain control over the upstream ownership structure. This control is necessary when hosting government data or systems, which requires the operator to obtain and maintain an Australian Government Hosting Certification. The test for obtaining and maintaining this certification is dependent on the ownership structure of the operator.

Forward funding and forward commitment structures

• Forward funding and forward commitment structures bring institutional capital into projects much earlier than traditional real estate models, with investors funding development against agreed milestones or committing to acquire completed assets in advance.

• Forward structures are increasingly common in Asia as institutional investors compete to access development pipelines in supply-constrained markets. These arrangements have direct parallels in build-to-rent and purpose-built student accommodation markets, where institutional investors fund development against pre-agreed specifications and milestones. In the data center context, the additional complexity lies in defining completion and handover standards for highly technical facilities, including commissioning benchmarks such as Tier III or IV certification, power usage effectiveness (PUE) thresholds, and customer-ready fit-out requirements. And increasingly, we are seeing some of these standards being committed to early in planning permissions.

Equipment manufacturer financing and lease backstops

• Equipment manufacturer financing and lease backstops have emerged as an increasingly important feature of U.S. data center transactions. Major hardware vendors, including server, GPU and cooling equipment manufacturers, are now acting as financing parties for personal property, offering lease financing, deferred payment arrangements and equipment-as-a-service models that reduce upfront capital requirements. 

• In some cases, manufacturers are also providing credit backstops to support tenant lease obligations. Under these arrangements, the manufacturer guarantees a portion of the tenant’s rent or provides a standby letter of credit, enabling operators with thinner balance sheets to secure premises from institutional landlords. 

• Structuring these backstops requires careful attention to the interplay between the primary lease, the backstop agreement and any equipment financing, including subordination, cure rights and remedies on tenant default.

The common theme is clear: successful site acquisition is no longer simply about securing land. The distinction between site selection and transaction structuring is increasingly blurred. The winning sites will be those where capital, infrastructure, community benefit, and expertise can be brought together most effectively.

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Authors: Charlie Reid, Partner; Michael Condlyffe, Senior Associate; Ismael Fernandez Anton, Partner; Maria Antonia de Prada, Associate; Camarin Madigan, Partner; Laura Morton, Partner; Neva N. Wagner, Partner; Chris Beaumont-McQuillan, Partner; Daisy Choi, Senior Associate; Kit Lee, Senior Associate; Alex Peace, Partner; Matt Taylor, Partner; Jane Hall, Partner and Yi Ming Choo, Director.