🚨Pennsylvania is a front-line beneficiary of the AI data center surge, with regional reports tallying $110B+ of announced builds—including Amazon “AI campuses.” Grid operator PJM warns hyperscale demand could triple by 2030, elevating risks around interconnection delays, rate cases, and upgrade costs. For CRE, land value is now inseparable from deliverable power: grid-proximate parcels and brownfield sites near substations command premiums, and leases require index-linked energy pass-throughs to keep DSCR intact.
Announced PA data center pipeline: $110B+ (2023–2025 announcements)
PJM outlook: Hyperscale/data center load could ~3× by 2030
Loan Performance. Volatile power costs elevate operating expense variance and DSCR risk; index-linked utility pass-throughs and minimum load covenants preserve debt service. Cap/floor structures should carve out energy, and EPC upgrade deposits need to be modeled as upfront cash uses.
Demand Dynamics. Absorption is power-gated: sites with redundant feeders, water access, and transformer availability win. Industrial-adjacent submarkets with existing substations show rent beta; greenfield without queue position trails.
Asset Strategies. Prioritize grid-adjacent or brownfield parcels; pre-arrange transformer/gear; design for heat reuse and efficiency to unlock incentives and reduce effective $/kW. Sequence TI/MEP with utility milestones to cut downtime.
Capital Markets. Term sheets favor energy pass-through clarity and utility LOIs. Senior proceeds hinge on contracted kW and interconnect status; spreads compress for sites with near-term energization.
Rates matter, but power availability/pricing is the gating factor.
Favor grid-proximate industrial and brownfield with existing substations.
Finance with clear energy pass-throughs and utility milestone conditions.
Watch rate cases/upgrade cost share in lender structures.
🛠 Operator’s Lens
Refi. Lock index-linked energy pass-throughs; separate energy in cap/floor language; escrow for upgrade deposits.
Value-Add. Package heat-reuse + efficiency to access utility/IRA-linked incentives; hold 10–15% EPC contingency tied to interconnect.
Development. Stage interconnect studies early; procure long-lead transformers/switchgear; align COD with utility milestones.
Lender POV. Price to energization risk; prefer contracted kW and utility LOIs; tighter covenants around load ramp and curtailment.
PJM queue reforms to govern timelines and upgrade cost allocation.
Rate cases will reset site economics and NNN pass-through dynamics.
Evaluate IRA-linked credits and utility programs for on-site/near-site generation.
PMJ, Allegheny Front/WESA
