Merger & Acquisitions Talks with Jack Backes on “The Next Data Center Play? Think Real Estate”
The data center market is heating up as artificial intelligence and the digitalization of society drive record high data center development. Yes, from coast to coast, data center construction is surging, with primary markets showing a record 6,350 MW under construction at the end of 2024, more than double the 3,077.8 MW at year-end 2023, according to CBRE’s North America Data Center Trends H2 2024 report,
As demand soars, investors are flocking to this market, with the real estate sector showing particular interest, according to a recent article in Mergers & Acquisitions. Jack Backes, Principal Strategist at Provident Data Centers (PDC), was among the real estate experts interviewed for the article. PDC is a division of Provident, a highly respected Dallas, TX-based firm with a $65.9 billion diverse national real estate and investment portfolio.
Investors Exploring New Parts of the Country for Data Center Development
Several investors discussed new, previously untapped U.S. sectors starting to attract data center development, due to ready availability of land and other resources becoming scarcer in U.S. areas with heavy data center clusters.
Chris Ortega, managing director and head of Americas for Morgan Stanley Investment Partners, said significant incremental growth is moving into Atlanta, which he characterized as “almost spillover” from northern Virginia, home to the largest data center concentration in the U.S., as well as in Denver and Charlotte. He also predicted data centers will soon emerge in Nashville and Minneapolis and added that “some tech firms are looking at campuses in places like Nebraska and Iowa where land and power are cheap but have limited connectivity.”
The oil-and-gas regions of the Southwest are also getting attention, according to the article, as are industrial areas of older cities in the Northeast and Midwest. Data center size and computing capacity is also a factor.
“Finding 10-50 MW of power is easier than finding those multi-hundred MW commitments,” says Abe Bui, vice president at Houlihan Lokey (NYSE: HLI). “The challenge is, where? The multi-strategy real estate companies with massive portfolios of warehouse and industrial sites are looking at what the best use for those properties is, especially data centers. There are definitely a lot of conversations happening. The utilities and industrials with land are also evaluating opportunities.”
Provident’s Jack Backes Discusses the Advantages of In-fill Development
Jack noted that an overlooked opportunity for mid-scale developers is in-fill development, particularly brownfield sites close to population centers.
“When considering investment in a tertiary site,” Jack says, “achieving economies of scale is important for optimizing resource utilization across the project lifecycle, from minimizing construction costs through leveraging shared infrastructure to maximizing operational efficiency in areas like energy consumption and cooling.”
Provident Data Centers has begun a major nationwide data center expansion plan, with a hyperscale data center now under construction in the Dallas-Fort Worth Metroplex. Fifteen more data centers are currently in the planning stages. Jack, who has extensive experience in both real estate development and data center infrastructure, leads sales and partnership activities as the company scales to meet demand for next-generation digital infrastructure.
Click here to read the full Mergers&Acquisitions article, “The Next Data Center Play? Think Real Estate.”
