How Panattoni is Shaping the Future of Data Centers

Data centers are no longer afterthoughts — they are critical components of modern infrastructure. As AI workloads, cloud computing, and streaming demand push global data consumption to unprecedented levels, the question of *where* and *how* to build a data center has become one of the most consequential decisions in commercial real estate.

Panattoni Development Company, one of the largest private industrial developers in the world, is placing a serious bet on that shift. Adam Kramer, Panattoni's head of data centers, has been vocal about the company's ambitions — and the thinking behind them reveals a lot about where the industry is heading.

The Demand Problem Nobody Has Fully Solved

The numbers behind data center growth are staggering, but the more important story is *why* growth is accelerating rather than plateauing. Generative AI alone has rewritten the power math. A single ChatGPT query consumes roughly ten times the electricity of a standard Google search. Multiply that across billions of daily interactions, add the compute demands of model training, and you get an infrastructure gap that existing facilities simply cannot close.

The U.S. data center market is projected to require over 35 gigawatts of additional capacity by 2030 — a figure that would have seemed science fiction five years ago.

Traditional hyperscale players like Amazon Web Services, Microsoft Azure, and Google Cloud have responded by signing massive land and power deals across Northern Virginia, Phoenix, and the Dallas-Fort Worth corridor. But those markets are running into hard ceilings: constrained power grids, community opposition, and land prices that have tripled in some submarkets. The opportunity — and the challenge — for developers like Panattoni is finding the next tier of viable markets before the crowd arrives.

Panattoni's Positioning in Data Center Development

Panattoni's entry into data center development is not a pivot — it's an extension of what the company already does exceptionally well. The firm has built its reputation on large-scale industrial and logistics facilities, which share more DNA with data centers than most people realize. Both asset classes demand rigorous infrastructure planning, long lead times for permitting and utility coordination, and tenants with highly specific technical requirements.

What Panattoni brings to data center development is a developer's discipline applied to a sector that has historically been dominated by owner-operators building for their own use. By approaching data centers as a speculative and build-to-suit product — the same way they approach Class A logistics — Panattoni is introducing market-rate flexibility to an asset class that desperately needs it.

Kramer's focus appears to be on identifying markets where power availability and land costs haven't yet been bid up by hyperscaler competition, while still offering the fiber connectivity and workforce that enterprise tenants require. That's a narrow target, and hitting it consistently requires a site selection process far more rigorous than what most industrial developers are used to.

Site Selection: Why Location Is Everything (and More Complicated Than Ever)

If you ask a data center operator what keeps them up at night, power ranks above almost everything else. A 100-megawatt campus — a mid-sized facility by today's standards — draws enough electricity to power roughly 80,000 homes. Securing that kind of load from a utility requires years of coordination, significant substation investment, and increasingly, a credible sustainability story to satisfy both regulators and corporate tenants with net-zero commitments.

Geography shapes the power calculus in ways that aren't always obvious from the outside. States with deregulated energy markets offer more flexibility in sourcing renewable power purchase agreements. Proximity to hydroelectric resources, like the Pacific Northwest or upstate New York, can meaningfully lower both costs and carbon footprint. Conversely, markets heavily dependent on natural gas face both cost volatility and growing pressure from hyperscalers that have made public renewable energy pledges they intend to keep.

Beyond power, the other major variable is community reception — something Panattoni has had to navigate directly. Ideastream Public Media's coverage of Panattoni's plans noted local resident concerns, a dynamic that is playing out in data center markets across the country. Localities want the tax revenue (a 100 MW facility can generate tens of millions annually in property taxes), but residents increasingly push back on the land use, traffic, and visual impact. Developers who treat community engagement as a checkbox are learning, painfully, that it's actually a critical path item.

The sites that pencil out in this environment share a specific profile: access to 100+ MW of power with a clear expansion path, interstate fiber routes, proximity to population centers without being inside them, and local governments that have done the work of pre-permitting or creating data center-friendly zoning.

The Financial Architecture of a Data Center Investment

Data center economics look nothing like standard industrial or office development, which is part of what makes them attractive to sophisticated developers willing to learn the asset class.

Build costs have escalated sharply. A hyperscale shell — the building itself without the mechanical and electrical fit-out — might run $10–15 million per megawatt of IT capacity when you factor in land, infrastructure, and construction. A fully fitted colocation facility with redundant power and cooling systems can reach $15–20 million per megawatt or higher in supply-constrained markets. Those numbers have climbed 30–40% since 2021, driven by supply chain disruptions, transformer shortages, and surging demand for specialized construction labor.

The return profile, however, justifies the capital intensity for investors who can hold. Stabilized data center assets trade at cap rates in the 5–6% range in primary markets, but the real value creation happens during lease-up. Long-term leases with investment-grade hyperscalers — often 10 to 15 years with fixed escalators — provide the kind of cash flow predictability that institutional capital finds extremely compelling.

For Panattoni, the play is developer margin: acquire land at pre-appreciation prices, coordinate power and permitting ahead of the market, and deliver a product when demand is at its peak. Execute that cycle well, and the returns on cost can significantly exceed what stabilized cap rates suggest. Execute poorly — miss a power deadline, lose a key tenant, or misjudge a market — and the capital at risk is substantial.

What Comes Next: The Trends Reshaping Data Center Development

A few forces will define the next five years of data center development, and smart developers are already building them into their underwriting.

Distributed architecture is gaining ground. Rather than consolidating compute in a handful of mega-campuses, enterprise and edge use cases are pushing demand toward smaller, strategically located facilities closer to end users. Latency requirements for autonomous vehicles, real-time financial processing, and industrial IoT applications create demand that a centralized Virginia campus simply cannot serve. Panattoni's industrial footprint across secondary markets positions them well for this shift, if they choose to pursue it.

Liquid cooling is no longer optional. The thermal density of AI-optimized GPU clusters has made traditional air cooling physically inadequate. Direct liquid cooling, immersion cooling, and rear-door heat exchangers are moving from experimental to standard in new builds. Developers who design facilities assuming air-cooled deployments are already behind.

The energy transition is colliding with data center growth in real time. Utilities in major markets are grappling with load growth they didn't project, and some are pushing back on new large-load interconnection requests. Developers who can bring creative energy solutions — on-site generation, battery storage, co-location with renewable projects — will have a meaningful competitive advantage in both permitting and tenant acquisition.

The firms that win in data center development over the next decade won't just be the ones with the deepest capital. They'll be the ones who figured out how to move fast in a sector where the infrastructure constraints are genuinely hard, the community dynamics are genuinely complex, and the technology requirements are moving faster than most construction timelines allow.

Panattoni has the scale, the industrial discipline, and apparently the leadership appetite to compete at that level. Whether their data center ambitions translate into a dominant market position depends on execution — and on whether they've already locked up the power that everyone else is still chasing.

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