The AI boom is changing the real estate economy: where grid capacity becomes scarce, secure access to electricity increases in value – and capitalizes on the price of land.
Everyone knows the slogan in connection with real estate: location, location, location.
Data centers are not just any real estate that houses people, but those that provide chips with a shell. Chips have different requirements than humans. And so the slogan here is increasingly: power, power, power.
Great Britain shows how scarce the resource power has become. There, the regulatory authority Ofgem wants to introduce commitment fees and binding milestones in the grid connection queue for data centers. Because network capacity itself is becoming an increasingly scarce commodity. Consequently, those who reserve a connection should have to prove that there is actually capital, technology and a feasible project behind the project.
And demand continues to grow. According to UNECE, global electricity consumption by data centers could almost double from around 485 TWh in 2025 to 950 TWh in 2030. Growth at different speeds meet: Large electricity consumers can be created within two to five years, while the expansion of transmission grids can take more than ten years.
This is increasingly changing the real estate economy. This can be observed in Munich in particular. PGIM has sold a site there developed for a data center. The site now has building permits, regulatory approvals – and, above all, a secured, high-performance 30 MVA grid connection. It is remarkable how PGIM itself classifies the sale: The value created by obtaining planning permission and securing the grid connection is thus realized.
A plot of land with a secure grid connection is no longer just ground. It is an option for scarce infrastructure: Power!
The economist David Ricardo would probably have understood this. His theory of land rent follows a simple idea: the scarcity and productive advantages of a plot of land are reflected in its value. In the 19th century, it was particularly fertile soil. In the 20th century, it was the best location. In the AI age, access to energy is added.
📌 What we are currently observing is the capitalization of the electricity shortage in the land value.
