With AI and cloud computing fueling unprecedented data demand, the global data center market is experiencing explosive growth. But with power constraints, capital intensity, and sustainability challenges reshaping the landscape, how are investors and operators adapting? In this Q&A, Colliers’ Raul Saavedra, Vice Chair, Head of Data Center Advisory | Americas, sits down with Anjee Solanki, National Director Retail & Practice Groups | U.S., to discuss the evolving role of data centers, the challenges investors face, and what’s next for the industry.

Anjee Solanki (AS): How has the role of data centers evolved over the past five years?
Raul Saavedra (RS): The industry has seen significant changes, primarily driven by the rise of cloud computing and now AI. Five years ago, many companies split their IT infrastructure – some workloads remained on-premises, while others were housed in third-party data centers.

That model has shifted as hyperscalers like Microsoft, Amazon, Google and Oracle have made it easier for businesses to adopt cloud-based solutions. This has fueled massive growth in data center demand, with AI, cryptocurrency, and digital transformation further accelerating the sector’s expansion.

AS: What are the key factors in selecting a site for a data center?
RS: Site selection is primarily power-driven. A viable data center location needs:

In major data center markets like Northern Virginia, Northern California, and Chicago, available power has become a bottleneck. As a result, emerging markets like Reno and the Carolinas are gaining traction.

AS: Data centers are attracting more commercial real estate investors. What challenges do newcomers face?
RS: The biggest challenge is capital intensity. A single data center campus may require $500 million to $1 billion in equity, and speculative financing at these amounts is nearly impossible to secure.

Additionally, 80% of leasing activity comes from hyperscalers – meaning if an investor does not secure one of these tenants, their options are limited. This exclusivity is why the sector is largely dominated by institutional players like Blackstone, Brookfield, Macquarie, and DigitalBridge.

AS: With long development timelines, how do operators future-proof their facilities?
RS: The shift toward longer lease terms has been a game-changer. Five-year leases used to be common, but now 15-year leases provide stability and allow operators to plan for evolving technology needs. Developers are also structuring deals to reduce risk by increasingly utilizing triple-net lease structures (NNN), which shift both capital and operational costs to tenants. Additionally, scalable power delivery has become a priority to ensure facilities remain competitive and adaptable to future demand.

AS: How is financing for new builds structured in the data center sector?
RS: Given the scale and associated risk, it is difficult to procure speculative financing and even construction financing with a tenant in hand because of the size of the loan and the risk associated with the delivery and even stabilized financing often has to be split among different groups because of the scale since there isn’t a single group that can manage that risk.

Because of the high capital requirements, many data center projects involve partnerships or syndications to spread risk. Institutional lenders like Blue Owl are playing an increasingly important role in funding large-scale developments.

AS: Sustainability is a growing focus for data centers. What efforts are being made to decarbonize the sector?
RS: Sustainability has been a priority for hyperscalers, with many committing to zero-emission targets. Data center operators have responded with renewable energy programs, but the challenge is that power constraints in major markets are forcing some reliance on natural gas. This has led to increased interest in nuclear energy as a long-term solution. While widespread adoption is still years away, it’s becoming a major topic in discussions around decarbonization and energy resilience.
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