Are Data Centers Overhyped? — A Recap of The Not Podcast Podcast with Nick Carter of Altus

Are Data Centers Overhyped? Exploring the Power, Potential, and Challenges in a Growing Industry

In this episode of The Not Podcast Podcast, Michael Mandel and Nick Carter, Senior Director / Team Lead US Real Property Tax Case Management at Altus, dive into the intricate world of data centers. They explore the role of data centers in today’s technology-driven landscape, the financial and environmental challenges they face, and their evolving significance in the real estate sector.

Listen and watch the full episode below!

A Primer on Data Centers

Nick provides an overview of data centers, describing them as massive server hubs that power everything from cloud services to AI and cryptocurrency operations. Historically, data centers emerged in regions like Northern Virginia, benefiting from proximity to government infrastructure and transatlantic fiber connections. Today, these facilities have become the backbone of the digital world, yet their operations hinge on one critical factor: power.

Real Estate Meets Tech: A Unique Asset Class

Michael and Nick explore the nuances of data centers as real estate assets. Unlike traditional buildings, data centers combine technical complexity with real estate fundamentals. Property taxes and site selection play pivotal roles in their profitability, with operators carefully choosing locations to optimize power access and connectivity.

Demand Surges, But Power Limits Growth

The demand for data centers is skyrocketing, driven by blockchain, AI, and other processor-intensive technologies. However, power availability has become the industry’s Achilles’ heel. Nick highlights Microsoft’s innovative decision to utilize Three Mile Island for a data center, showcasing the lengths companies go to secure energy sources. Despite a 25% growth in supply, the power grid’s limitations are stifling the sector’s expansion.

Taxation and Valuation Complexities

As data centers grow in prominence, so do the challenges in valuing and taxing them. Michael and Nick discuss the importance of understanding these facilities’ intricate designs and market dynamics to ensure accurate assessments. The pair also highlight the regional differences in taxation, with California’s Proposition 13 offering a unique case study.

The Cryptocurrency Conundrum

The episode delves into the intersection of data centers and cryptocurrency. Nick examines the heavy energy consumption of Bitcoin mining and its environmental impact, raising questions about the sustainability of such operations. While blockchain technology offers transformative potential, it also introduces significant risks and complexities for the data center industry.

The Future of Data Centers

Looking ahead, the hosts emphasize the need for innovative solutions to power limitations and environmental concerns. As data centers continue to evolve, they will remain at the forefront of technological progress, shaping everything from global internet traffic to financial markets.

Catch the full conversation on Episode 3 of The Not Podcast Podcast! Watch here on YouTube.