By Peter Grant

Developers of a Utah data center have secured one of the biggest construction loans in recent years, the latest sign of the market's enormous appetite for facilities that provide the backbone for artificial intelligence.

JPMorgan Chase and Starwood Property Trust have agreed to lend $2 billion for the 100-acre data center campus in West Jordan, Utah, outside Salt Lake City.

The borrower, a venture of real-estate investor CIM Group and Novva Data Centers, said the facility will be able to provide 175 megawatts of continuous service thanks to a power deal with the local electric utility. That is roughly enough juice to power 175,000 average-size U.S. homes.

The loan marks the second data center construction loan of more than $2 billion this year, following a $2.3 billion loan in January from JPMorgan Chase for a facility in Abilene, Texas. Until recently nearly every data center construction loan was less than $1 billion, and typically amounted to less than half of that.

Now, lenders are starting to write much bigger checks because data centers are getting much larger to serve AI, which consumes more advanced chips and more power. Data centers are also increasingly getting commitments from big-name tenants before breaking ground, rather than building on a speculative basis with little preleasing.

"It's evolving fast," said Jordy Roeschlaub, co-president of global debt and structured finance at Newmark, which arranged the Abilene deal.

More than 6.3 gigawatts -- or 6,300 megawatts -- of data center capacity was under construction in the top eight markets at the end of 2024. That was more than double the amount of a year earlier, according to CBRE Group.

Data centers are also popping in parts of the country they never did before.

Tech companies like to locate their servers near large population centers, major fiber-optic networks, and other tech and telecommunications company servers. But these markets in places such as northern Virginia, Atlanta and Chicago have run into power and land limitations and public opposition.

Developers and "hyperscalers" such as Amazon.com and Microsoft are now moving where they can find sufficient power, water and friendly local governments.

Meta recently said it is planning a $10 billion data center in Richland Parish, La. Google last year broke ground on a pair of data centers in Dorchester County, S.C., as part of a major expansion effort in that state.

New data centers are focused on markets with "the ability to deliver power in scale and jurisdictions that can fast-track it," said Roy March, chief executive of real-estate investment banking firm Eastdil Secured.

Novva founder and CEO Wes Swenson was early to the Utah market, acquiring the site near Salt Lake City in 2018. Swenson formed Novva in 2019 with CIM, which has a range of infrastructure and commercial real-estate projects in Europe and the Americas.

CIM and Novva began constructing the first phase of the facility in 2020 without any signed leases because Utah wasn't a big data center market and some of their new data center technologies were untested, said Avi Shemesh, CIM co-founder and principal. "We had to prove our design," he said.

The first phase opened in 2023 with the rest opening by the end of 2026, and it is already fully leased, the developers said. Utah is a good location for data centers because the region has a low risk from earthquakes and other natural disasters, Swenson said.

But Utah and other Western states have one big drawback: The region is dry. Obtaining enough water to prevent a data center from overheating is a major challenge.

"Virtually everything west of Denver is water scarce," Swenson said. "You can't go into these cities responsibly and use water for cooling."

The Utah project limits the amount of water it uses with a cooling system that consists of four 12-inch pipes that run around the perimeter of the facility. That system reduces the amount of water evaporation, which greatly increases water usage at other data centers.

"You recirculate the water," Swenson said. "It doesn't evaporate."

Still, the availability of power continues to slow data center development in Utah and other states. "Before the AI surge in 2023, you could reasonably get a pretty good path to power in three years," Swenson said. "That is moved now to five or six."

Write to Peter Grant at peter.grant@wsj.com

(END) Dow Jones Newswires

March 04, 2025 10:56 ET (15:56 GMT)

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