U.S. data center owner DataBank is getting ready to build its first three-story data center, bringing its real estate portfolio to new heights as it expands across the country at a time of record demand for its space.
The Dallas-based data center provider with more than 65 data centers throughout the United States plans to start construction next month on a $400 million, three-story data center in the Dallas area. The data center, designed to bring 40 megawatts of power to the Dallas-Fort Worth region, is one of 15 new data center hubs in various stages of development that DataBank has underway as it seeks to bulk up its real estate portfolio, said Jerry Blair, a senior vice president at DataBank.
"We are expanding in every market we can across the country," Blair told CoStar News. "We have seen bookings come in at a record pace all year long [and] like most other data center providers, and we are full. We need more space."
DataBank isn't alone in its desire to scale its real estate portfolio to help meet the supply constraints in the U.S. data center market. Market conditions are expected to remain tight in the coming year as data center developers grapple with finding the land and the access to power to build this kind of space. The run on land that can be developed and earmarked for data centers has some providers building taller data centers or going to suburbs in major metropolitan areas.
Case in point: DataBank's first three-story, ground-up data center will rise adjacent to its existing center in Plano, Texas, at 8375 Dominion Parkway. DataBank worked with its power delivery provider Oncor to add additional capacity to a 6-acre tract for the project, which is about 25 miles north of downtown Dallas. The company had to go vertical — adding a story atop its two-story model — to have enough space to produce 40 megawatts of power.
"We didn't have the land to go wide, so we went tall," Blair said about the Plano project. "It will have the mechanical and electrical equipment on the bottom floor with two floors of data center above it."
DataBank also retrofitted a former office building in downtown Dallas for its headquarters and data center, Blair said, but that is a one-off situation and not a new purpose-built data center development.
Leasing Demand
This new Plano hub is DataBank's only three-story, ground-up data hall in its construction pipeline, Blair said, but the company could add taller designs in the future to keep up with demand. Construction hasn't even begun and the plans for the data center have been attracting the interest of a wide variety of would-be users, Blair said.
From credit enterprise users to hyperscale users to artificial intelligence companies, Blair said DataBank has its pick of occupiers. Each would-be occupier also wants at least 3 megawatts of power, if not 6 megawatts or 9 megawatts, which quickly gobbles up the planned 40 megawatts of power at the facility, he added.
"We are being very conservative and cautious on how much AI business we take, knowing there will be some big winners and losers in the AI frontier," Blair told CoStar News. "We also want to keep capacity available to the enterprise users who are credit-rated and the hyperscale community."
The go-go pace of leasing data centers is a sharp departure from three years ago when Blair said he was doing everything short of washing a client's car or mowing their lawns to get deals across the finish line. Now, DataBank can't build enough data centers for all the demand in the market, even with the help of some big capital raises this year.
"We are trying to expand as fast as we can, but there are a lot of constraints," Blair said, adding that utilities around the country have become constrained as infrastructure, such as new transmission lines, is needed to deliver more capacity. Blair said he expects demand to remain elevated for the next three to five years.
Dallas-based Corgan is the project architect on the new Plano data center, scheduled for completion in 2025, according to a state work permit. DataBank has additional projects in the works in Northern Virginia; Brooklyn Park, Minnesota; Atlanta; Salt Lake City; Denver; Las Vegas; San Diego; Irvine, California; Kansas City, Kansas; and Orangeburg, New York.
Building Supply
Like DataBank, U.S. data center developers have been grappling with supply constraints tied to a land rush for power-accessible property in major metropolitan areas to help deliver a low latency to its users.
DataBank's seven existing data centers in the Dallas-Fort Worth region, the nation's fourth-largest region with more than 7.8 million residents, are full and they need to add capacity. That's why the company is adding to adjacent acreage next to its Plano data center — and they aren't the only data center provider looking at ways to add to their offerings, said Bo Bond, executive managing director in Cushman & Wakefield's global data center advisory group.
"The providers are trying to keep up with demand, but there's a very limited supply," Bond, who is based in Dallas, told CoStar News. He said the reasons for the constrained supply are complicated with limited gear available on the utility side and the requirements of users having grown dramatically in recent years.
Bond said he expects U.S. data center developers to continue to build taller data centers as they seek to buy power-accessible land to keep up with demand for new space.
"Everything has grown exponentially," Bond said. "I think we'll continue to see a significant amount of demand for the foreseeable future. That is why you have a lot of equity driving the market. Developers are out there speculating on land for campuses and are looking to build out the infrastructure to supply it."