Global Data Center Locations

The Real Estate Espresso Podcast

Global Data Center Locations

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Global Data Center Locations

Welcome to the Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. Today we’re talking about the global quest for data center locations, why this has become one of the most important real estate questions in the digital economy.

But first, today’s show is sponsored by the Cost Segregation Guys. If you own investment real estate and haven’t looked seriously at cost segregation, you could be leaving significant tax savings on the table. The Cost Segregation Guys help investors accelerate depreciation, improve near-term cash flow, and make more efficient use of the capital without changing the underlying asset. To learn more, click on the link in the show notes and you’ll qualify for a discount because you came from the show. You definitely want to check out the Cost Segregation Guys.

Earlier this week we talked about data centers in the context of infrastructure. Today we’re talking about the global quest for data center locations. Of course they need reliable power and redundant fiber, cooling, and physical security, and enough land to support expansion. But today site selection has become much more complicated. It’s no longer just an engineering problem. It’s a legal problem, a geopolitical problem, and increasingly a national security problem. And it’s those last elements we’re going to be talking about today.

A number of recently published articles on data sovereignty all point to the same conclusion. Data sovereignty is not simply about where the server sits. It’s also about who controls the data, which laws can reach it, and who holds the encryption keys, who operates the systems, and whether the data can be moved across borders in an emergency without violating local law. In other words, the old real estate mantra of location, location, location has a new cousin in the digital world. It’s all about jurisdiction. That distinction matters a lot.

A recent Canadian analysis on data sovereignty and the U.S. Cloud Act argued that storing data in Canada doesn’t automatically make it sovereign. Control matters as much as geography. Around the same time, the Canadian government’s digital sovereignty framework emphasized the need to manage and protect data, protect systems and infrastructure so that operations can continue securely and independently.

Now these are not abstract legal ideas. They shape where tenants want to lease capacity and how hyperscalers design the regional architecture in which countries can realistically compete for new deployments.

Now we’ve got to add the physical risk to the equation. Last month, drone strikes damaged two Amazon Web Services facilities in the Middle East, one in the United Arab Emirates and one in Bahrain. Amazon said the strikes caused structural damage, power disruption, and the fire suppression incidents led to additional water damage. Amazon advised customers that they had to relocate the workload to other data centers, and that there in fact would be a disruption. They described their recovery as prolonged, meaning and measured in months.

This was a physical attack on cloud infrastructure, first time that’s happened in the world. This changes the conversation. Would Amazon, Meta, Google put a data center today in Qatar within range of Iranian drone strikes? I’m not sure. Some of these data centers were placed there specifically because of data sovereignty concerns. Now those Amazon Web Services are being located elsewhere, potentially in violation of those data sovereignty regulations.

In many jurisdictions the obvious response would be to shift the workload to another region. But where regulations require sensitive data to remain in-country, or at least in-jurisdiction, cross-border fail-over is not always permitted. So the very redundancy models that engineers want to run could be at odds with the legal framework. The result is that resilience can no longer be measured only by backup generators and multiple fiber routes. It also has to be measured by where the backup plan can be legally used.

So that brings us now to South Africa. South Africa has emerged as one of the continent’s leading digital infrastructure markets, and the country’s newly released AI policy explicitly calls for stronger digital infrastructure, also voicing concerns about the dependence on foreign infrastructure. At the same time, new projects are being explored, including a proposed hyperscale data center in Durban. That facility could draw about 400 megawatts, though municipal officials have said the plan remains exploratory at this stage.

The country offers a compelling thesis: an established data center ecosystem, excellent undersea fiber connectivity, and a growing demand for locally hosted services in Africa. It comes with all the usual familiar constraints: power reliability, water, transmission infrastructure. Now of course those are not side issues, but we now have to add some additional constraints to the location of these data centers.

What’s also becoming clear is the U.S. is no longer a frictionless market for data center expansion. The state of Maine now has approved what might be the first statewide moratorium on new data centers, freezing approvals for facilities over 20 megawatts through October of next year while the state studies the impact on their infrastructure. But there’s eleven other states weighing similar measures, and even if the states don’t do it, it’s possible for facilities to be blocked at the local level through zoning regulations and various other bureaucratic stalling methods.

There’s plenty of examples. South Dakota’s Senate Bill 232 proposed a one-year moratorium on new hyperscale projects. The state also passed Bill 135 to preserve local authority to regulate or prohibit data center development. Oklahoma’s Senate Bill No. 1488 would pause projects above 100 megawatts until late 2029 while regulators study the impact on their resources. Vermont proposed a moratorium on data centers until July of 2030. Maryland has considered House Bill 120, an emergency bill that would impose a moratorium pending stricter co-location rules.

In Illinois the proposed Power Act would not ban data centers outright but would load a lot more additional obligations on data centers relating to disclosing water, energy, and siting obligations. In Virginia, the largest data center market in the country, local resistance has now become a zoning issue. Prince William County in Virginia abandoned a 1,700-acre campus after years of controversy and voter support for the new facilities dropping sharply.

The message is straightforward. Site selection is no longer just about power and fiber and water; it’s also about political capital. So what is the thesis for investors and developers? The winning data center locations of the future will not just be simply cheapest land or fastest entitlement; it’ll be the places that can offer, of course, the dependable power and connectivity and all of those other things, the physical security, but the legal framework that customers can use to satisfy their data sovereignty requirements without sacrificing resilience.

So there’s no question data center demand is growing, but it’s also learning that not every megawatt is equal and not every location is safe, sovereign, or resilient.

As you think about that, have an awesome rest of your day. Go make some great things happen. We’ll talk to you again tomorrow.

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