As the demand for data centers continues to soar, Indiana has emerged as a prime location for hosting these vital facilities. This resource outlines the essential steps involved in the process of leasing properties in Indiana for data centers, providing practical insights and best practices to ensure a successful lease agreement. Additionally, it highlights the significant growth of the data center industry in Indiana, discussing the factors driving this boom and what landowners need to be aware of to capitalize on this opportunity. Whether you are a seasoned property owner or considering leasing for the first time, this resource aims to equip you with the information necessary to navigate this evolving market landscape.
What should landowners know about data center development in Indiana?
Over the last decade, the data center market has been growing rapidly, undergoing a remarkable transformation. Data centers serve to be an essential part in maintaining internet growth and online service demand. They serve as specialized locations of vast computer networks and storage systems that work around the clock to process, store, and manage data.The North American data center market is projected to grow to $143.52 billion by 2028, with rapid demand expansion and a CAGR of 17.1%.
Indiana has recently become an attractive location for data center development in the United States over the last few years. Indiana has witnessed a growing demand for cloud services and data storage and is home to over more than 30 data operational data centers. Over the last year, large market players such as Amazon, Google, and Meta have announced plans to expand large hyperscale projects in the area due to its strategic location, energy resources, tax incentives and growth potential. Data center projects are gaining increasing traction as they create opportunities to provide benefits not only for the general economy and the job market, but also for landowners across the state.
LandGate provides a marketplace that connects property owners of all types who want to sell or lease their properties directly to data center developers seeking suitable properties in Indiana for data centers, while also providing useful data to owners to help them make informed decisions through this process. Equipped with information about the value of their land, capitalization rates, and much more, LandGate provides landowners in Indiana with extensive property data at no cost to help navigate the process of leasing or selling their land for a data center.
To learn more about your property's potential suitability for a data center, get a free Property Report by finding your property on LandGate's map, and check out the data center value index score, which rates your property's suitability for a data center on a scale of 0-100:
Why is it attractive to lease or sell your property for data centers in Indiana?
Indiana has shown great potential for development in the area and offers a large scale of return on existing data center projects in the area. With projects ranging from colocation to hyperscale and enterprise data centers, major players are investing in large scale projects in the area. For example, Amazon’s $11 billion data center campus in New Carlisle is set to spread over 800 acres of land. Other companies such as Google, Meta, Equinix and Amazon Web Services have set up data centers in the area and have been quick to integrate artificial intelligence and environmental sustainability measures into their projects.
While the buildable acreage for data centers in Indiana can vary according to project specifications, the typical size range for small facilities can start off with just a few acres while large-scale projects cover an average of 100-150 acres. Larger data centers in Indiana can exceed 200 to 300 acres. A medium-sized data center will typically range between 50-90 acres of land, and is the most popular size of property that developers demand in Indiana.
Along with the financial gain from either leasing or selling their property for data centers, landowners in Indiana should be aware of the benefits that developing a data center has on the regional and state economy. Over the last three years, Indiana has shown promising development and job generation opportunities in the data center industry. For example, Google’s $2 billion data center in Fort Wayne created over 200 full time positions while Meta’s $800 million data center project in Jeffersonville created over 300 jobs in construction, maintenance and data center operations. With each data center creating hundreds of jobs for local contractors, suppliers, on-site and maintenance workers, they also generate full-time job opportunities across colocation facilities and hyperscale projects.
Additionally, Indiana is moving towards advanced technological methodologies and has been fast spaced in data center technology development by incorporating artificial intelligence, machine learning, and edge computing methods within their work spaces to improve overall efficiency and performance. Latency reduction efforts, like reducing data file size for smoother data transmission, have increased with the advancement of technology within data centers. For example, Digital Crossroads Data Center in Hammond has incorporated advanced cooling techniques that reduce water consumption and energy usage.
Moreover, data center projects in Indiana are incorporating environmental sustainability methods to increase energy and productive efficiency, making them low-traffic sites with reduced infrastructural strain, which preserves the nature of rural land. Many companies have included initiatives such as advanced cooling techniques such as liquid cooling of HVAC. Major players such as Amazon Web Services and QTS have opted to take advantage of renewable energy and have installed large solar farms to completely power their data centers. For example, Meta’s Jeffersonville data center has proposed achieving net-zero emissions across its entire value chain by 2030 and is incorporating energy efficient cooling systems as well as switching their power load to renewable, solar energy in efforts to reduce overall environmental footprint.
Indiana experiences a range of temperature fluctuations that could pose challenges to data centers. With high humidity levels, flooding risk, and threat of severe weather events such as thunderstorms, tornadoes and heavy snowfall, data centers have shifted towards modern construction methods to withstand natural disasters. The Amazon Web Services data center in New Carlisle is designed with elevated structures and flood defense construction mechanisms to mitigate the risk of flooding. Google’s Fort-Wayne Facility has efficient robust power backup systems that can maintain operations during power outages. Similarly, many data centers have taken on natural disaster and risk mitigation, creating location facilities that are built to withstand damage and have energy efficient ventilation systems, creating a reliable stream of income for landowners that lease their land for data centers regardless of the risk of natural disasters.
Considerations for Property Owners in Indiana
By leasing or selling property in Indiana for the development of data centers, landowners are able to contribute to the infrastructure that keeps the digital world and the economy running smoothly. Indiana property owners of all types, ranging from private property owners to corporations and governments, are not only a critical component in the digital network that supports the technology provided by data centers we need to operate every day, but also a key component to regional and state economic development.
There are various factors that developers look for as they determine if a property qualifies for a data center. Zoning and regulatory laws will impact the amount of land eligible for development. The property’s proximity to power and fiber optic sources will also affect a property’s suitability for data center development.
With Indiana being at a locational advantage through serving as a trade hub and port for the country, landowners and data center developers can mutually benefit from the planning and development of data center projects. With great sales tax exemptions for data centers, property tax abatements, and investment tax credits, developers are looking for long term leases that allow overall cost reductions and around the year operation. Long-term tax benefits allow data center investors to enter into long-term lease agreements with landowners to construct data centers on their property, which provides a secure and consistent source of income for property owners.
Institutional and government property owners in Indiana also have the opportunity to lease their properties for data center development to generate revenue and contribute to economic growth. To learn which of your agency’s specific sites are most suitable for data center development, book a free consultation call with the government & corporate team at LandGate below:
How to Lease Property for Data Centers in Indiana
Understanding the process of leasing land for data centers in Indiana is essential for landowners, as it involves not only negotiation of terms but also compliance with local regulations and assessment of site suitability.
Step 1: Land Qualification
The first step for landowners in Indiana curious about leasing or selling their land for data center development is to understand if their land is suitable for a data center. Factors such as location, buildable acreage, zoning, topography, proximity to energy and utilities, and environmental considerations like flood zones and wetlands all impact a property’s viability for a data center. If you're curious if your land in Indiana your property's suitability for a potential data center by finding your parcel on LandGate’s map:
Step 2: Market Your Property for Lease or for Sale for a Data Center
Listing your property in Indiana for lease or for sale for the construction of a data center on LandGate’s marketplace is the best way to market and get the most value from your property. By listing on LandGate’s marketplace, you are presenting your property to various competitive companies actively searching for properties in Indiana to lease or buy for data center development.
If you’re unsure if your property could be suitable for a data center, our team recommends creating a listing anyway- listing is completely free with no obligations to accept any offers, so you never know what kind of offers you may receive.
Step 3: Receive Lease Offers
Once your listing is live on LandGate’s marketplace, any interested developers will reach out to you directly with offers using the contact information provided when you registered for your LandGate account.
Step 4: Lease Negotiation
Negotiating the ground lease offer is the first step you will take after receiving an offer. LandGate is unable to provide legal advice or assist with conducting due diligence on any offers that you receive, but we can refer you to a licensed expert that can help. These professionals, such as commercial real estate brokers, attorneys, and engineers, can assist you in ensuring that you are securing a good deal.
Always remember that lease agreements are completely negotiable. You can negotiate things like the value of the lease payments, the length of the lease, and the percentage of the escalator. Typically, ground leases for data centers range from 75-99 years, and generally provide escalating base rents, percentage rent arrangements, and outline responsibilities for maintenance and utilities.
Step 5: Lease Option Agreement
After negotiations, developers need to retrieve data center option agreements. Typically, this follows a check by the developer, ensuring that the land meets their needs and in the case of tax exemptions of subsidiaries, meets all necessary government requirements. It is essential for both parties involved in the agreement to assess possible engineering and land factors, to ensure the feasibility of the project and ensure that it receives all necessary approvals to begin. Oftentimes, data center proposals will be pitched to the county or state government.
Why can’t I get a lease agreement directly?
The process of developing any large data center begins with the developer optioning the land, also known as ‘site control,’ typically through a Ground Lease. Once thorough land evaluation has taken place, utility application is necessary. This means that the data center project will need further due diligence to ensure that sites have required proximity to a power source (renewable or a power substation), access to fiber optic cables, and that necessary easements are in place.
Where can a landowner get more information about the lease?
You can find out if your property could be suitable for a data center by getting a free property report from LandGate. LandGate provides data center value index scores for every property in the U.S., which will evaluate your property on a scale of 0-100, letting you know how suitable your property could be for a data center. Get a free property report by finding your parcel on LandGate’s map:
Step 6: Lease Agreement
Once site control is confirmed, the project is then moved to a ‘planned’ phase. The option agreement now becomes an official lease agreement, and the landowner begins to receive lease payments from the data center developer. The specific amount of these lease payments depends on what is negotiated in the lease.
Step 7: Data Center Construction
Lease payments for data centers are phased as projects progress. Typically, the lease payments start as a small amount during the option period and increase during the construction phase of the data center, with payments reaching their peak upon completion of the data center.
Depending on the size of the project, constructing a data center can take anywhere from 18 to 40 months before the data center reaches full operation. Smaller projects will take a substantially less amount of time to complete.
Step 8: Active Data Center
After construction is completed and the data center is fully operational, the lease enters the ‘production’ phase, which indicates that the land is now responsible for data storage and transmission through the data center. This period will last throughout the remainder of the lease.
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