Data Centre Greenfield Development Models
Executive Summary
Key Takeaways
- ✓ Greenfield data centre development carries site selection and power interconnection timeline risk that an operational expansion of an existing facility does not, since a new site's utility interconnection process can be a longer and less certain driver of the delivery schedule than construction itself.
- ✓ Construction sequencing should be modelled against the same phased capacity delivery discipline applied elsewhere in this pillar, tranche by tranche, rather than a single blended completion date.
- ✓ Pre-leasing status, the proportion of planned capacity already contracted before construction begins, materially affects development risk, and the model should distinguish pre-leased from speculative capacity explicitly.
- ✓ Speculative (non-pre-leased) capacity carries materially higher development risk than pre-leased capacity, and the financing structure and required return should reflect that difference rather than a uniform development risk assumption across all planned capacity.
Objective¶
This guide sets out how to model a greenfield data centre development within Data Centre Financial Modelling, from site selection through stabilised operation.
Site Selection and Power Interconnection Risk¶
Greenfield development carries site selection and power utility interconnection timeline risk that an operational expansion of an already-connected, already-operating facility does not face. A new site's utility interconnection process, securing the power allocation and grid connection the facility requires, can be a longer and less certain driver of the delivery schedule than the construction itself, particularly in constrained grid markets, consistent with the power availability discipline in Hyperscale Data Centre Models.
Construction Sequencing Against Phased Delivery¶
Construction should be sequenced against the same phased capacity delivery discipline applied elsewhere in this pillar, tranche by tranche, matched to demand and the site's actual interconnection timeline, consistent with Data Centre Capacity Planning Models, rather than modelled to a single blended completion date that ignores intermediate delivery milestones and their associated capex and revenue timing.
Pre-Leasing Versus Speculative Capacity¶
Pre-leasing status, the proportion of planned capacity already contracted to a tenant before construction begins, materially affects development risk. The model should track pre-leased and speculative capacity as explicit, separate categories: pre-leased capacity carries revenue risk protected by a signed tenant commitment, while speculative capacity, built without such a commitment, carries genuine leasing risk consistent with the demand validation discipline described in Net Absorption (Data Centre).
Financing Implications of Speculative Capacity¶
Speculative capacity should carry a materially higher development risk assumption than pre-leased capacity, and the financing structure and required return applied to it should reflect that difference, rather than applying a uniform development risk assumption across all planned capacity regardless of its pre-leasing status.
Common Construction Pitfalls¶
Power interconnection timeline assumed equivalent to construction timeline. Understates the delivery schedule risk in a new-site development, particularly in constrained grid markets.
Construction modelled to a single blended completion date. Ignores phased delivery milestones and their associated capex and revenue timing.
Pre-leased and speculative capacity not distinguished. Obscures the materially different revenue risk each carries.
Uniform development risk assumption applied regardless of pre-leasing status. Misprices the financing and required return for speculative capacity.
Recommended Practices¶
- Model site selection and power interconnection timeline as a distinct, potentially binding schedule risk.
- Sequence construction against phased capacity delivery tranches, not a single completion date.
- Track pre-leased and speculative capacity as explicit, separate categories.
- Apply a materially higher development risk assumption, financing cost, and required return to speculative capacity.
Continue Reading¶
Related Pillars¶
Related Technical Guides¶
Related Glossary¶
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Frequently Asked Questions
How does greenfield development risk differ from operational expansion risk?
Greenfield development carries site selection and power utility interconnection timeline risk that an operational expansion of an already-connected, already-operating facility does not face, since a new site's interconnection process can be a longer and less certain driver of the delivery schedule than the construction itself.
How should construction be sequenced in the model?
Against the same phased capacity delivery discipline applied elsewhere in this pillar, tranche by tranche matched to demand and the site's actual interconnection timeline, rather than a single blended completion date that ignores intermediate delivery milestones.
What is pre-leasing status and why does it matter?
The proportion of planned capacity already contracted to a tenant before construction begins. Pre-leased capacity carries materially lower revenue risk than speculative capacity built without a signed tenant commitment, and the model should track and distinguish the two explicitly.
How should speculative capacity be treated differently from pre-leased capacity in the model?
With a materially higher development risk assumption and, correspondingly, a different financing structure and required return, since speculative capacity carries genuine leasing risk that pre-leased capacity, protected by a signed tenant commitment, does not.
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