Data Center Development Diary: Day 1

Chris Curtis is the co-founder and SVP of Development for Compass Datacenters. We are publishing a series of posts from Chris that will take you inside the byzantine world of data center development, shedding a pro's light on the many aspects of the development process. Stay tuned for more installments!

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Although development is rarely in the spotlight, it plays a major role in the success of a data center project. My goal in this series is to take you through the development process of a project that we are currently working on to share tips, best practices and head shaking anecdotes that might help you on your next data center project  - if they don’t make you wonder why anyone would do this for a living first.

Before we begin, let’s agree on what defines the term “development.” In my experience, development is an all-encompassing term that includes identifying a site, acquiring a site, working with local municipalities to obtain the appropriate permits, licenses and approvals, building the facility, and finally turning it over to the customer. Although this all seems very straightforward, it rarely is…in fact, it never is. I’ve spent the past 12 years developing buildings for the federal government, and no two projects were ever alike. But, as they say, if it were easy, everyone would be doing it. Now that we’ve got the ground rules established, let’s start at the beginning.

Selecting the Site

Our customer wants us to build their 1MW data center near a large southeastern city, so I began looking for an appropriate location using my usual process. Just to be clear, data center sites are never selected, but rather identified through a process of elimination. You look for a location that is the appropriate size, with access to power and fiber, at a reasonable price, that isn’t located near facilities that could impact its operations like chemical plants, missile silos or federal penitentiaries. Through my analysis I identified four sites that would support the project. Unfortunately, during the interim, the customer decided that they wanted to locate the facility in an area that they felt was closer to their potential customer base.

Customer epiphanies like this aren’t uncommon and, most of the time, are actually welcome because they enable me to reduce the time required for my search by honing down the number of prospective markets. In this instance, the issue wasn’t that they had selected their desired location; but rather, the city they had selected. This upscale suburb is well known throughout the state as having extremely exacting site and building requirements. Requirements so exacting, in fact, that many leading developers avoid it like the source of a communicable disease.

Location, Location, Location

In terms of site selection, the customer’s chosen municipality offers a few challenges. First, the topography can euphemistically be described as undulating. Since data centers crave nothing more than a flat plain, this increased the difficulty of the search project, but the price of land posed a greater complication. Data centers typically have all the aesthetic appeal of the average Costco, therefore they tend not to be located in a town’s high-rent district. Typically, you can acquire the land for a new facility for $2-$3 per square foot. In the area the customer desired, land costs were three to four times that amount.

I don’t know who coined the phrase, “It’s not what you know, but who you know” but it definitely could have been a developer. Through a local contact I learned about a foreclosed property that a bank was looking to divest itself of for $6 per square foot. At first glance, it seemed like it would meet our needs, despite some topographical issues. However, when we took a closer look we found that the site wouldn’t support the five data centers that we eventually planned to build.

Back to the Drawing Board

Back at square one, I decided to take a slightly different tack and meet with the customer to see if they would agree to broaden the scope of potential locations. Although they remained firm on the city, they did agree to a small, but important concession. Due to a spate of new office construction to the west side of the main freeway that bisected the city, the customer wanted to locate their new data center in the same proximity. With just a hint of desperation in my voice, I was able to convince them that we may be able to find the site of our dreams, if we also looked to the east.

No one ever said “Go east, young man,” but in this case whole new vistas opened, and I was able to locate a 14 acre parcel for just $3.00 a square foot. While not nirvana, it was certainly close to it. It was big enough to build the five facilities that we desired and was located adjacent to a sub-station. Best of all, the customer liked it. Based upon this mutual level of site enthusiasm, we purchased the land and concluded the easy part of the project.

In the next installment of this series: I receive an approval manual larger than a phone book, hire a civil engineer, and learn why it may be easier to build a strip mall than a data center.

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