Key Real Estate and Environmental Considerations for Global Data Center Projects

The global boom in data center demand is showing no signs of slowing down. Regardless of where data centers are built, these projects bring various environmental, real estate, and regulatory considerations. By remaining attentive to varying real estate and environmental regulatory frameworks across jurisdictions, data center developers will be able to effectively lay the groundwork for scalable deployment across emerging markets.

US TRENDS

The continued and increasing demand for entitled data center land with all necessary utilities and capacity agreements is driving developers to negotiate letters of intent at an early stage and push for exclusivity and expedited delivery timelines. This is also resulting in an uptick in cost reimbursement agreements between tenants and landlords, which allow for early design, construction, and the purchase of equipment to deliver projects on a quick timeline and protect developers should a lease negotiation terminate without a fully executed lease.

As more data centers are being built, community groups are increasingly taking an active role in assessing and questioning these developments. Common concerns from community groups include those related to air quality, noise, and traffic. Developers can help address these concerns by conducting appropriate environmental and site studies to have answers on hand for those raising questions and by taking appropriate measures, such as sound mitigation, to lessen the impact of these projects.

The US also has a system of local, state, and federal environmental regulations that may come into play when securing permits and other approvals for data center developments, such as:

• Rules that protect wetlands both where a data center will be built and any roads or access points used for the project
• Data centers may be subject to state or federal rules meant to protect specific plants or animals, such as the Endangered Species Act, the Bald and Golden Eagle Protection Act, or the Migratory Bird Treaty Act
• Federal laws such as the National Environmental Policy Act and state equivalents require developers to study the environmental impacts of a project
• Air permits may be required for a data center’s primary power source as well as any backup, supplemental, or black start generators

JAPAN

Japan’s relatively relaxed regulatory regime and lack of barriers to foreign investment have resulted in considerable data center development by the world’s largest operators and hyperscalers.

Even with the less restrictive regulatory environment, there are various legal and compliance considerations for data center investments in Japan. Some noteworthy rules include:

• The Act on Protection of Personal Information (APPI): The APPI is Japan’s comprehensive data protection law applicable to data centers, and requires businesses that handle personal information to securely manage such information; this includes requiring businesses that transfer personal information offshore to inform the individual how their information is protected by the laws of the offshore jurisdiction and obtaining the individual's consent
• Telecommunications Business Act: This requires any data center operator providing telecommunications services to customers to register with the Ministry of Internal Affairs and Communications; however, operators that provide only hosting or co-location services are not required to be registered
• Foreign Exchange and Foreign Trade Act: Under this law, foreign investors must obtain government approval before acquiring an interest in certain business sectors, including information technology services and critical infrastructure services such as those related to defense, energy, finance, or government, or information processing services

Zoning and land use are governed by local ordinances and regulations. Further, while there are no restrictions on foreign ownership of real property in Japan, investors should be aware that real estate customs and practices are highly localized. Therefore, a foreign investor will need to retain a local asset manager or broker to facilitate any real estate acquisition in Japan.

Investors may also want to take advantage of subsidies that may be available to those who develop the data centers outside the Tokyo and Osaka areas.

FRANCE

France is one of Europe’s biggest data center markets. Investments in France are often made through the direct acquisition of land where a data center will be built or through the purchase of a stake in a company developing a new site.

For those building in France, there are several considerations to be aware of, including the following:  

• The need to secure the electrical connection according to the contemplated power and with limited delays
• Electrical connection can take seven years for certain areas in France
• Preliminary steps to filing proper authorizations

Before filing the necessary authorizations, data center developers must also address several preliminary requirements, such as the following:

• Ensure the feasibility of the project in terms of urban planning law
• Obtain specific approval from the prefecture if the project is located in Ile de France and has a surface area higher than 5,000 m²
• Complete an environmental evaluation to assess the project’s environmental impacts (biodiversity, water, etc.)

Then, the following administrative authorizations must be obtained:

• A building permit
• An environmental authorization (ICPE)

As of April 30, 2025, France has created several new obligations for data center operators:

• As of October 1, 2025, the creation (or significant modification) of a data center with a capacity exceeding 1 MW has been subject to a prior cost-benefit analysis of the economic feasibility of improving the efficiency of heat and cooling supply
• Operators (concerning data centers with a capacity exceeding 1 MW) must recover the heat produced and redistribute it, for example, to the public heating network of the cities around
• Operators will soon be required to provide energy information when the power exceeds 500 kW via a digital platform

CONCLUSION

Data center development requires careful coordination and planning. With global demand continuing to increase, it is helpful for both data center landlords and tenants to work with advisors in real estate, energy, and technology to build detailed documents to prepare for the construction, leasing, and utilities required at the sites ahead of negotiations, so parties are ready when a site is found. Time is of the essence in finding these sites, so having a good team in place is essential in being able to work towards a successful site.