How Developers Underwrite Data Center Sites

Underwriting is the process a developer, investor or lender uses to decide whether a specific site can support a specific project at a return worth the risk. It is narrower than a market thesis and more financial than a feasibility study. The feasibility study asks whether the site physically works. Underwriting asks whether it pays, when it pays, and what could go wrong between signing and the first rent check.

The market backdrop has made one part of that easier. CBRE reported vacancy across North America’s primary markets holding at 1.4% in the first half of 2026, with 7,481 MW under construction and more than 80% of that capacity already preleased.² In Northern Virginia, vacancy fell to 0.2%.² JLL’s year-end 2025 report, which measures the market differently, put North American vacancy at a record-low 1% for a second straight year and expected Texas to overtake Virginia as the largest data center market by 2030.⁷ When space is that scarce, the question is less “will someone lease this?” and more “can we deliver it on time and at a cost the lease supports?”

That does not mean every site is financeable. Tenants still choose among sites, and a site that cannot show a credible power date will lose to one that can.

Most underwriting starts with a short list of questions. If any answer is unknown, the site is priced as if the answer is unfavorable until proven otherwise.

1. 01How many megawatts can the utility deliver, on what ramp schedule, and is the answer in writing? A will-serve letter is a start, not a commitment.
2. 02What will the developer pay to get that power: substation, line extension, network upgrades, collateral and any minimum demand obligation?
3. 03Can the land hold the planned campus after floodplain, wetlands, slope and setbacks are removed? See buildable acreage.
4. 04Is the use permitted by right, or does it need a rezoning or special use permit, and how has the county treated recent applications?
5. 05Are fiber, water and wastewater available at the scale and redundancy the design needs?
6. 06What incentives and tax treatment apply, and are they stable enough to underwrite? Our guide to incentives vs. power costs covers the trade-off.

JLL’s 2026 outlook put it bluntly: power, not location or cost, has become the primary site selection criterion because of multiyear waits for grid connections.⁸ The same outlook expected nearly 100 GW of new global capacity between 2026 and 2030, which keeps utilities, equipment suppliers and contractors stretched.⁸ The order of the questions above reflects that ranking.

Land is a small part of the budget. Cushman & Wakefield’s 2026 cost guide put site acquisition at about 7% of greenfield development cost, while power infrastructure was the single largest category at about 21%.¹⁴ That is why developers will pay more for land with a credible power path: a cheaper parcel that needs a new transmission line can cost far more in total.

Cost to power has three parts. The first is capital: the developer’s share of the substation, line extension and upgrades. Allocation varies widely. In one Maryland case, a switching station and transmission work for a data center campus were estimated at about $33 million, with the developer contributing about $2.17 million and the utility’s ratepayers covering the rest, a split one commissioner objected to.⁹ Regulators are moving toward assigning more of these costs to the large customer; see who pays for transmission upgrades.

The second is the long-term contract. Ohio regulators approved an AEP Ohio tariff in July 2025 that requires new data center customers above 25 MW to pay for at least 85% of contracted demand for up to 12 years, including a four-year ramp, with exit fees and proof of financial viability.⁵ Virginia’s regulator created a new rate class for customers of 25 MW or more with stronger financial requirements in November 2025,⁶ and in August 2026 ordered Dominion to develop a tariff assigning more transmission costs to data centers.¹⁰ Underwriting now has to treat the electric service agreement as a long-dated obligation that survives a tenant loss.

The third is the energy price itself, which drives operating cost and tenant interest. Our guide to electricity rates for data centers covers that side.

A data center earns nothing until it is energized and leased. Every month of delay pushes rent out while interest, equipment deposits, land carry and staff costs continue. For that reason, developers often value a site with a firm two-year power date above a cheaper site with an uncertain one.

Delay is common, not exceptional. Sightline Climate’s research, covering 140 large projects, estimated that 30–50% of data centers scheduled to come online in 2026 would be delayed by power constraints, equipment shortages and local opposition.³ In 2025, it found 26% of 110 expected projects slipped.³ Equipment is a large part of the problem: Wood Mackenzie projected a 30% supply deficit for power transformers in 2025, with imports covering an estimated 80% of U.S. supply.¹¹ Our guide to transformer and switchgear lead times has the detail.

Underwriters handle schedule risk in a few ways: by modeling a delay case alongside the base schedule, by phasing the campus so the first building can energize on available capacity, and by tying land payments and option extensions to utility milestones rather than calendar dates. The energization timeline guide walks through where the months go.

At its simplest, development returns are a spread. The developer compares the stabilized value of a leased campus with its all-in cost. If the leased asset is worth meaningfully more than it cost to deliver, the project creates value; if not, it doesn’t matter how good the land is.

• All-in cost: land, cost to power, entitlement, site work, building, mechanical and electrical systems, financing during construction, and the cost of time. Cushman & Wakefield’s 2026 guide put the average for modern greenfield facilities in the U.S. and Canada at about $17.6 million per MW, excluding chips and GPUs, after a 21% rise since late 2024.¹
• Revenue: lease rate per kW per month, term and tenant credit. CBRE reported that average asking rents rose for every major deployment size in North America’s primary markets in the first half of 2026.²
• Stabilized value: what an investor would pay for the leased campus. It depends on tenant credit, lease length, market and interest rates.

A site’s job in this math is to keep cost and time down and certainty up. A buyer that finds a gap in any of those will either lower its land price, ask for a longer due diligence period, or walk. See who finances data centers for how lenders view the same risks.

Whether you own land or are assembling a project, the fastest way through a buyer’s underwriting is to answer its questions before it asks them, with documents rather than descriptions.

• Power: the nearest substations and lines by voltage, any written utility correspondence, and the utility’s current large-load tariff and contract terms.
• Land: boundary survey or plat, title status, mapped floodplain and wetlands, slope and a realistic buildable acreage estimate.
• Entitlement: current zoning, whether data centers are permitted, and recent county decisions on similar projects.
• Utilities beyond power: fiber providers and routes, water and sewer capacity, and gas if onsite generation is likely.
• Constraints: easements, mineral rights, airport proximity and neighbors that could shape the layout.

Our why data center sites fail guide lists the issues that most often end deals in underwriting. If you want an independent read on how a site will look to a developer, you can get a site reviewed.