The Magical Ingredient for a Successful Data Center Land Transaction
Data center developments are booming. Tenants are desperate for new capacity, and colocation operators are loudly complaining about the scarcity of both power and land. Yet, some sites stay on the market for months—or even years—despite having ample power and the right zoning. So why aren’t demand and supply finding balance?
The oldest lesson in real estate
As with any commercial property, a data center is designed to generate revenue through leasing or selling physical space. When developing a hundred-million-plus data center campus, the very first question should always be: is there real client demand for this? No sane developer would build a fully fitted data center speculatively without confirmed customer interest.
And yet, my news feed regularly features shiny announcements of “X-hundred-megawatt campuses” in far-flung regions of Germany—complete with glossy renderings but no real tenants. Most of these projects, I’m confident, will never see the light of day.
End users simply aren’t interested in locations outside their availability zone. The challenges developers face in finding land or power in major markets are not their concern. They rely on the 30-odd data center operators and developers in the market to find capacity somewhere. A decision to consider expanding the search radius of a hyperscale client is not made easily —or, as we saw in Berlin, establishing an entirely new region.
In short: you must build your data center where your clients want to be, not where you wish they did. It’s still the same old mantra: Location, Location, Location.
Other countries have lovely data centers too
Another common misconception: that a given country must build more of its own data centers. But much of that capacity could just as easily sit across the border. The alternative to Frankfurt might not be Stuttgart, but Zürich. Not Kiel, but Copenhagen. Not Berlin, but Warsaw.
When latency and data sovereignty aren’t decisive factors, colocation deployments can be highly flexible. The EU’s recent AI data center initiative proves that: there’s an entire world beyond Germany’s borders.
So, is Germany’s supply exhausted?
Not at all. There’s still plenty of room to grow:
– Frankfurt remains a challenging environment for new sites, but strong demand keeps developers motivated. Power grid upgrades continue, and some previously overlooked areas are now emerging. Those with the financial stamina to hold land for a few years might be best positioned when the next window opens.
– Berlin’s main challenge lies within its existing clusters—both the established ones and those where developers have already locked in power. Outside these, untouched capacities still exist, though they require a bit more risk tolerance.
– Other regions—from metros to rural areas—also hold potential. Different client bases (local enterprises vs. global cloud players) and use cases (AI mega-campuses vs. edge deployments) will shape their growth. Microsoft’s planned AI data centers in the Cologne/Düsseldorf area are a prime example of a new cluster forming.
In essence, data center development is no different from any other real estate business: it requires a clear understanding of client demand, awareness of preferred locations, a willingness to take calculated risks, and patience for the right market momentum.