Developers Race to Keep Up With AI’s Data Center Land Grab

A new wave of AI-driven data center demand is upending traditional real estate playbooks, forcing developers to rethink everything from site selection and power procurement to capital structure and risk management. As hyperscale users and cloud providers compete for land and megawatts in select U.S. corridors, questions are mounting: Are capital markets treating these projects as core infrastructure or as higher‑beta development bets, and what happens to nearby land values, industrial and multifamily assets as the data center footprint expands?

RREAF Holdings CEO Kip Sowden explains how one diversified sponsor is stress‑testing projects, navigating tighter financing conditions and preparing for the next phase of multifamily volatility in markets being reshaped by digital infrastructure.

CM: How is AI driven demand fundamentally changing how developers approach data center site selection today?

KS: AI has completely changed the conversation around site selection because the scale and speed of demand are unlike anything the industry has seen before. A few years ago, developers focused heavily on connectivity, tax incentives, and proximity to population centers. Today, the first question is whether the market can support the power requirements these facilities need.

The AI boom is forcing developers to think more like infrastructure operators than traditional real estate investors. We are evaluating long term grid stability, redundancy, water access, transmission expansion plans, and how quickly utility providers can realistically deliver capacity.

CM: Power availability has become a critical constraint. How are you underwriting and managing power risk in new developments?

KS: Power risk has become one of the most important underwriting variables in the entire development process, and any firm looking at data center development today has to treat it as a core diligence item, not a secondary check. It requires far more upfront coordination with utilities, municipalities, and infrastructure partners before capital is ever committed.

You cannot assume future capacity will be there when you need it. What matters is verifying what is truly deliverable, on what timeline, and with what level of certainty. The underwriting process has to stress test power delivery schedules, potential infrastructure delays, interconnection risk, and long-term pricing exposure, because even modest delays can have an outsized impact on project returns.

At the same time, meaningful innovations are happening in real time, beginning to shift the landscape. Nvidia recently signed a significant $3 billion deal with Corning. Experts believe the deal is meant to replace copper with Corning’s optical glass fibers in Nvidia’s AI rack-scale system. The integration is known as co-packed optics and has the potential to reduce both costs and traditional power transmission constraints over time. Developments like that underscore how quickly the infrastructure layer is evolving and why underwriting has to stay close to both utility fundamentals and emerging technologies.

CM: Are you seeing developers prioritize proximity to power infrastructure over traditional location drivers like population density?

KS: Access to power infrastructure is increasingly becoming a defining factor in data center site selection, but it is not replacing traditional location fundamentals entirely. There will always be a meaningful pull toward proximity to major urban centers, particularly because the workforce supporting these facilities will want reasonable access to housing, amenities, and quality of life considerations tied to nearby cities.

The optimal outcome in most cases is not isolation from urban cores, but rather strategic positioning just outside them. Secondary markets located within a 30-to-45-minute drive from a major metropolitan area often represent the ideal balance. They can provide the land availability, scalable power infrastructure, and supportive local jurisdictions needed for development, while still maintaining access to a strong labor pool and urban connectivity.

This dynamic is creating a very specific subset of markets that historically may not have been considered institutional data center hubs but now are becoming highly competitive. If a location can deliver reliable and expandable power, reasonable proximity to a major city, and aligned local leadership, it can quickly move to the forefront of consideration.

CM: How are capital markets currently viewing data centers, more as core infrastructure or as opportunistic development plays?

KS: We are seeing both, depending on the investor profile and where the project sits in the lifecycle. Institutional capital increasingly views stabilized data centers as critical infrastructure because demand fundamentals are exceptionally strong and long term. There is a growing belief that digital infrastructure will be as essential over the next twenty years as logistics and multifamily have been over the last twenty years.

At the same time, development remains more opportunistic because execution risk is still very real. Power procurement, construction timelines, and tenant requirements are all evolving rapidly. Investors want exposure to the sector, but they are being selective about who they partner with and which markets they enter.

CM: What impact is that perception having on financing terms, cost of capital, and deal structuring?

KS: Lenders and equity groups are rewarding projects with strong infrastructure visibility and experienced operators. If a developer can demonstrate secured power, credible tenant demand, and realistic execution timelines, capital is available.

The challenge is that construction costs and infrastructure requirements are substantial, so there is a much higher emphasis on predevelopment diligence than we saw historically. We are also seeing more creative structures involving joint ventures, phased deployments, and infrastructure partnerships to help manage risk and capital exposure.

CM: As you lean into data centers and other alternatives, how are you repositioning your multifamily strategy in markets seeing both housing demand and digital infrastructure build out?

KS: We still believe strongly in multifamily because job creation and population growth continue to drive long term housing demand. What is changing is how we evaluate the surrounding economic ecosystem.

When a market attracts meaningful digital infrastructure investment, it often creates a broader employment ripple effect across engineering, construction, operations, logistics, and professional services. That can support multifamily demand in a very durable way.

We are focused on markets where infrastructure investment and population growth are reinforcing each other rather than competing against each other. Those tend to be the markets with the strongest long-term fundamentals.

CM: What kinds of multifamily products, workforce, Class A, or build to rent, pair best with data center driven growth, and where do you see the most near-term volatility?

KS: We believe Class B multifamily and build to rent are particularly well positioned to benefit from data center driven growth because they align closely with the broader employment base these projects tend to create. Not every role connected to a data center ecosystem is high income technical talent. You also have a significant number of construction workers, operators, technicians, and support services that generate steady housing demand across more attainable price points.

In addition, extended stay hotels play an important role during the development and build phase. Large-scale data-center construction requires a rotating workforce of contractors and specialized labor that often needs flexible, short-term housing solutions for extended periods of time. That creates a meaningful demand layer in well-located hospitality assets near these development sites.