When a data center is proposed for land near a neighborhood, the entity named on the permit application is often not the company most people would recognize. It may be a limited liability company incorporated months earlier, with a name like “Ridgeline Data Holding LLC” or “Cascade Infrastructure Partners.” The connections between that entity, the real estate developer behind it, and the technology company whose servers will eventually fill the building may take weeks of research to establish.
This opacity is not incidental. The data center industry has developed a structure in which the end users — the technology companies whose computing needs drive demand — are frequently separated from the development process by layers of real estate intermediaries. That structure has practical consequences for communities: it means the entity that shows up at a zoning hearing may not be the company whose business decisions are actually driving the project, and the accountability relationships are correspondingly diffuse.
The End Users: Hyperscalers
At the top of the demand chain are the companies whose computing needs drive most large-scale data center construction: Amazon Web Services, Microsoft Azure, Google Cloud, and Meta. These four companies are sometimes called hyperscalers because of the unprecedented scale at which they operate and expand. Together, they account for the majority of new large-format data center construction in the United States.
Each hyperscaler operates through two channels. In some cases, they build and own their own facilities outright — often on large, multi-building campuses that they design, finance, and operate. Northern Virginia, the Phoenix metro area, central Ohio, and the Dallas-Fort Worth metro have all seen major hyperscaler campus development. In other cases, they lease capacity from colocation providers, which allows them to expand into new markets more quickly without bearing the full capital cost of construction.
When a hyperscaler builds its own campus, it typically does so through a wholly owned subsidiary or a real estate entity established for the purpose. The hyperscaler’s name may not appear in local permit records at all until construction is well underway, if it appears at all. This is partly legal strategy — limiting liability and obscuring competitive information — and partly operational practice in an industry where secrecy about infrastructure locations is treated as a competitive asset.
The Developers: REITs and Colocation Operators
A different set of companies occupies the space between hyperscalers and communities: the real estate investment trusts and colocation operators who build, own, and operate data center facilities on behalf of multiple tenants.
Equinix is the largest publicly traded data center REIT by market capitalization and operates more than 260 data centers in over 70 metropolitan areas globally, with significant concentration in U.S. markets. Digital Realty is the other major U.S. publicly traded REIT, with a large portfolio of colocation and wholesale data center facilities. QTS Realty Trust, acquired by Blackstone in 2021 and taken private, operates large campuses primarily in secondary U.S. markets. Iron Mountain, better known historically as a document storage company, has a growing data center division. Together, these REITs and their private competitors represent a substantial portion of the data center capacity that hyperscalers lease rather than own.
The REIT structure — in which a company qualifies for favorable tax treatment by distributing most of its income to shareholders — shapes how these companies operate. They are under continuous pressure to deploy capital into new facilities and to maintain high occupancy across their portfolios. This creates an institutional incentive toward rapid expansion that reinforces the pressure from hyperscaler demand.
Colocation facilities serve not just hyperscalers but also mid-sized enterprises, financial services companies, government agencies, and other organizations that need more computing capacity than they want to manage themselves. A colocation data center in a given market may house dozens of different tenants, which means the local community impact — noise, water consumption, grid demand — reflects the aggregate load of many organizations, not just one.
Site Selectors and the Decision Chain
The decision about where to build a data center does not begin with the developer. It begins with site selectors — consultants hired by developers and end users to identify parcels that meet a specific set of criteria. Site selection is a specialized profession, and the major site selection firms maintain databases of available land, utility capacity, fiber routes, and local regulatory environments across hundreds of markets.
Site selection criteria for large data centers have shifted in recent years. According to CBRE’s analysis of current market dynamics, power availability has become the dominant site selection factor, outweighing traditional considerations like proximity to population centers. A site that can offer confirmed grid capacity within 18 to 24 months is far more attractive than one that requires a multi-year interconnection process, regardless of other characteristics. Roughly 84 percent of data center decision-makers now rank power availability among their top three site selection considerations.
Other criteria include fiber connectivity (proximity to long-haul fiber routes that carry internet traffic), land cost and availability, water access for cooling, and the local regulatory and political environment. That last factor — the regulatory environment — is where state and local policy decisions become directly relevant to site selection. Jurisdictions that have streamlined permitting, offer strong tax incentives, or have not adopted stringent noise or environmental standards are more attractive to developers than those that have not.
This is the mechanism through which communities with weak siting regulations attract disproportionate development: they are, in the language of site selection, a lower-friction operating environment. That friction reduction has costs that are borne not by the developer but by the community.
Tax Abatement: What Communities Give Up
Tax abatement is the single most consequential financial tool used to attract data center development, and it is among the least understood by affected communities.
A tax abatement is an agreement between a government entity — a state, county, or municipality — and a developer or operator, under which the developer pays reduced or no taxes on property, equipment, or sales for a specified period. The justification offered is typically that the development would not happen without the incentive, and that the jobs and economic activity generated more than compensate for the forgone revenue.
In the data center context, the most common abatements are sales tax exemptions on equipment purchases — since data centers buy enormous quantities of server equipment — and property tax reductions. Nearly every state with significant data center activity has enacted some form of data center tax incentive. Alabama offers up to 30 years of tax breaks. Nevada offers abatements reducing sales tax rates to as low as 2 percent and up to 75 percent reductions in personal property taxes for 10 to 20 years. Tennessee offers a reduced 1.5 percent tax rate on electricity used in data center operations.
Policy Matters Ohio, a nonprofit research organization, analyzed Ohio’s data center sales tax exemption and found that the largest operators do not even need to apply for approval as they expand — the Ohio Tax Credit Authority’s original approval gives them open-ended ability to avoid paying the tax on new facilities as long as they meet certain investment thresholds. The exemption, first created in 2013, covers computer equipment and construction materials, and its cost to the state in forgone revenue grows every year as more facilities are built.
For communities, the practical consequence of abatement deals is that the fiscal impact calculation changes substantially. A data center that is presented as a major source of tax revenue may in fact be generating far less revenue than its footprint and infrastructure demands would suggest, because the taxes have been reduced or eliminated. The costs of serving the facility — road maintenance, utility upgrades, emergency services — remain, while the revenue used to offset those costs is diminished.
How do you find out what deal your local government made? Tax abatement agreements are typically public records, though finding them requires knowing where to look. State economic development agencies often maintain searchable databases of approved incentive deals. Local government meeting minutes frequently contain motions approving economic development agreements with companies identified only by their project code names. Freedom of information requests to the relevant economic development authority or county finance office can produce the underlying agreement documents.
Economic Development Officials: The Relationship That Precedes the Process
Before any permit is filed, most data center projects begin with a conversation between a site selector or developer and a local economic development official — a county economic development director, a state commerce department representative, or a regional economic development organization. These officials are specifically tasked with attracting investment and job creation to their jurisdictions, and they typically view a large data center project as a success.
The involvement of economic development officials before any public process creates a structural dynamic in which local government has a prior relationship with the developer and a stake in the project’s approval before the public is ever notified. This does not mean that individual officials act improperly — they are generally doing their jobs as those jobs are defined. But it does mean that by the time a project reaches the planning commission, the developer has already made a presentation to county leadership, secured expressions of support, and potentially negotiated tax incentives. The planning commission is hearing a project that the county’s economic development office has already effectively endorsed.
For communities, this means that engagement needs to start earlier than the permitting process. Local residents who are concerned about data center siting in their area can engage their county commissioners and economic development offices before a project is announced — asking what criteria the county uses to evaluate data center proposals, what noise standards and setbacks it expects developers to meet, and whether it has adopted any data center-specific policies governing community impact. These conversations, when they happen before a specific project is on the table, can shape the framework within which future projects are evaluated.
Where the Information Lives
The principal public records relevant to data center development decisions are:
Planning and zoning records at the local level, including conditional use permit applications, zoning board hearing agendas, and approved permits with attached conditions.
Property transfer records at the county level, which show land sales and can be searched by parcel identifier or street address. The buyer’s identity may be an LLC, but the registered agent and state of incorporation are matters of public record.
Economic development incentive databases at the state level. Most states with active incentive programs maintain searchable public databases, though the level of detail varies.
Utility commission filings at the state level, which may include applications related to transmission upgrades or new substation construction driven by data center demand.
FERC filings at the federal level, for projects large enough to require interconnection agreements that involve regional transmission infrastructure.
None of these sources is difficult to access. Together they can provide a reasonably complete picture of what has been approved, what has been promised, and who the relevant decision-makers are.
CBRE North America Data Center Trends H2 2024 | Policy Matters Ohio: Tax Breaks for Data Centers | SDIA: US Tax Incentives for Data Centers by State | Forbes: AI Data Center Gold Rush and REITs
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