Traditional CRE underwriting for data centers is dead. Industrial comps. Flex frameworks. Rent per square foot. Here are 6 things you need to know according to the country's most experienced data center developer: Daniel English is Managing Partner at Legacy Investing, where he's developed data centers for 15+ years. We spoke to him and Ivo van Breukelen from The Proptech Connection about what matters in this space. Here are 6 shifts investors must understand: 1/ Data centers are civic infrastructure now: Cities evaluate them like ports and power plants. Planning departments look at grid impact before land use. "They were always considered a niche asset class, like a marina or an RV campground," says English. But not anymore. 2/ The market is splintering: Hyperscale campuses in rural areas still dominate headlines. But AI inference needs low latency, not cheap land. That's pushing 10-50MW facilities into urban and metro buildings. Legacy is converting a Chicago office building into a 30-50MW AI center. There's a "missing middle" of these mid-sized metro facilities that's emerging. 3/ Power is the constraint: The question used to be: do you have the land? Now it's: can you secure power on a real timeline? English saw a developer misread utility sequencing. The tenant realized power wasn't coming on schedule and walked. "They didn't do their load letters right and wiped out $60M of stabilized value with two sentences." 4/ Governments control supply: Northern Virginia recorded an 80% increase in under-construction capacity in H1 2025. Dublin froze development and data centers now draw 21% of Ireland's electricity. Amsterdam's moratorium protects power for housing. The same 40MW project can be welcomed or blocked depending on the jurisdiction. 5/ Easy money is gone, but yields vary: Compression is concentrated in long-term credit-backed hyperscale deals. Outside that segment, yields remain variable. "Where you make your best money is when the markets are opaque," English says. 6/ Expertise is the moat: Most LPs can't evaluate transformer lead times, cooling topology, or interconnection strategy. "There's a huge divide between LPs that are doing data centers and those that aren't," says English. "And I'm not seeing much overlap." The investors winning are bringing operating partners and engineers into the process early. Everyone else is bidding on land with "data center potential" and wondering why they never close. Full letter linked in comments.
Al de Palma
3mo
Sharp analysis. Treating data centers as civic infrastructure changes everything. Power and expertise now decide winners.
Great breakdown. Treating data centers as infrastructure, not real estate, changes everything. Power, policy, and execution expertise are clearly the real differentiators now.