The data center boom is creating new opportunities for land developers – but also new complexities. As demand surges, securing the right site isn’t just about land availability. Developers must navigate power constraints, water usage concerns, regulatory approvals, and community pushback, all while keeping demanding project timelines on track.
At Bisnow DICE Southwest 2025, Chad Riddle, Civil/Site Department Manager at Colliers Engineering & Design, shared expert insights on the biggest challenges in data center site selection. Developers must navigate power constraints, water usage concerns, regulatory approvals, and community pushback, all while keeping aggressive project timelines on track. While based in Atlanta, Chad has extensive experience working on major data center projects across the Southeast and the high-demand Northern Virginia region, two of the most active data center markets in the U.S. Although the Phoenix area has its own unique market dynamics, many of the site selection principles developers must consider – power access, entitlements, infrastructure, and environmental challenges – remain universal.
Why the Southwest? Power & Infrastructure Shape Development Decisions
The Southwest, particularly Phoenix, has emerged as a data center hotspot, offering competitive tax structures, lower land costs, and strong infrastructure support. In fact, Phoenix’s data center supply grew by 150.8 megawatts (MW) in the first half of 2024, surpassing Silicon Valley in inventory growth.
“Utility providers have been instrumental in facilitating data center growth,” Riddle explains. “They actively work with developers to plan substations and ensure reliable power, which is a major factor in site selection.”
However, local municipalities are reassessing their regulatory approach as more large-scale projects move in. Some jurisdictions, for instance, have approved changes to better regulate data center growth, including location restrictions and design specifications, due to concerns over land constraints and power demand.
For developers in Arizona and beyond, this means early engagement with local jurisdictions is key. Understanding power capacity, rezoning potential, and evolving regulations before acquiring land can help avoid costly roadblocks.
Environmental & Community Considerations: What Developers Need to Prioritize
Beyond zoning and infrastructure, environmental and community factors play a critical role in a project’s success.
Data centers can require significant water resources for cooling, and municipalities are taking a closer look at long-term sustainability. Some developers are now required to build on-site water reuse facilities, impacting both project cost and site planning. This is especially relevant in arid regions like Arizona, where water management is a major development factor.
The low-traffic nature of data centers often surprises residents, but sound concerns from backup generators and cooling systems have become a common issue. Developers who proactively address noise mitigation can improve community relationships and streamline approvals.
This is where Colliers Engineering & Design provides a distinct advantage – with in-house experts in environmental permitting, noise analysis, and infrastructure planning, we help clients anticipate and resolve challenges before they become roadblocks. “From land development and power planning to environmental and sound mitigation strategies, having an integrated team is a huge benefit for developers looking for a seamless process,” Riddle adds.
Alternative Cooling Methods in Water-Scarce Regions
In drought-prone regions like Arizona, where water conservation is a pressing issue, traditional water-intensive cooling methods are not always feasible for data centers. Developers are increasingly turning to alternative cooling solutions to mitigate water usage while maintaining energy efficiency. Indirect dry cooling is one such method that utilizes air-to-air heat exchangers to remove excess heat without direct water evaporation. This approach significantly reduces water consumption, making it particularly effective in the Southwest’s dry climate. Another common alternative is air-based cooling, which relies on ambient air rather than water to regulate internal temperatures. These systems are most effective in areas with low humidity and cooler nighttime temperatures, conditions that Phoenix and parts of Nevada can take advantage of.
When selecting a site, developers must evaluate the feasibility of these alternative cooling strategies and factor in local climate conditions, air quality, and infrastructure compatibility. While water treatment facilities may still be necessary in some cases, strategic site selection and the adoption of non-water-dependent cooling technologies can significantly reduce long-term operating costs and environmental impact.
Key Takeaways for Developers Navigating Data Center Site Selection
- Confirm Power & Water Infrastructure Early
Before securing land, developers must understand power availability and water capacity. Running into infrastructure limitations after acquisition can delay or derail projects.
- Engage Local Stakeholders Before Public Hearings
Municipalities and communities will have a say in approvals. Proactively addressing concerns – whether it’s noise, zoning, or infrastructure upgrades – can smooth the approval process and avoid opposition later.
- Regional Differences Matter, But Core Site Selection Principles Apply
While Chad’s experience has been primarily in the Southeast and Virginia, many of the same entitlement challenges, power concerns, and infrastructure hurdles apply to markets like Phoenix, making a strategic, data-driven approach to site selection critical for success.
- Larger Sites Are Driving the Future of Data Centers
The industry is shifting toward mega campuses, often hundreds of acres in size, rather than smaller, scattered developments. This allows for scalability, better infrastructure planning, and long-term expansion potential.
- Plan for Permitting & Regulatory Timelines
Environmental approvals, such as United States Army Corps of Engineers (USACE) permits, can take over a year. Developers who incorporate realistic timelines into their project planning will be better positioned for success.
Looking Ahead
With data center development expanding in both traditional and emerging markets, developers must stay ahead of shifting regulations, increasing environmental scrutiny, and growing infrastructure demands. While Arizona presents unique challenges, particularly around water and energy use, the insights from established markets like Virginia and Georgia can help shape smarter, more strategic development decisions nationwide.
Missed Bisnow DICE Southwest 2025? Read our in-depth article to explore key takeaways on data center site selection in Phoenix and beyond.