Michael Rareshide on Data Center Growth, Trends, and Challenges

The data center sector is experiencing unprecedented growth, and Site Selection Group’s Michael Rareshide, Partner, is at the forefront of this dynamic industry. In a recent interview with D CEO, Michael shared his expert insights on the market’s performance in 2024, the biggest deals shaping the industry, and what trends will define the future.
From the rising demand for high-performance computing (HPC) infrastructure to the challenges of power supply and evolving data center design, Michael provides a comprehensive look at what’s driving the sector forward. Below is his full Q&A from the interview:

Michael Rareshide, Partner, Site Selection Group 

D CEO: How would you rate 2024? Did the market perform better, worse, or about as you expected? 

MICHAEL RARESHIDE: “I have been in the data center and colocation real estate sector nationally since 1997, and calendar 2024 exceeded all expectations. We are in the midst of a data center boom across the U.S., with the DFW region being in the top two to three largest markets.”

D CEO: What was your biggest deal of the year, and were there any challenges in getting it closed? 

RARESHIDE: “Although the projects initially started in 2023, I represented Nvidia-backed CoreWeave—now one of the largest high-performance computing (HPC) infrastructure companies in the AI sector—in procuring and negotiating two long-term agreements with two different data center service providers. CoreWeave demanded very tight timelines for delivery of significant IT capacity by early 2024, and many data center operators simply could not meet the desired timeline. What we uncovered were two national operators, then off-market, that could and did meet these stringent requests.” 

D CEO: What’s the most interesting trend you’re seeing in your sector?  

RARESHIDE: “The amplified amount of power—to the tune of hundreds of megawatts per project—being demanded by both the hyper scale data center companies, such as Google, Meta, Amazon and Microsoft; and the AI, machine learning and HPC companies. All require enormous computing power to deliver their services to millions or even billions of users worldwide and are spending hundreds of billions of dollars annually in new infrastructure. It was only a few years ago that these corporations pursued a fraction of what they are requiring now.” 

D CEO: Which submarkets or property types are performing well, and which are struggling?   

RARESHIDE: “New data center campuses to handle high-density IT capacity that cater to these HPC and hyperscaler needs within the next two to four years will continue to succeed. Although there will be a continuing focus on major Tier 1 data center markets like Northern Virginia, Phoenix, and the DFW region, we are seeing significant growth in Tier 2 and 3 markets as hyperscalers hunt for areas that can deliver hundreds of megawatts of power in a one-to-three-year timeline.  

“The struggling submarkets would be areas like Silicon Valley and Southern California, where both power rates and costs of construction are significant barriers for new growth. The struggling property types comprise two different groups: older and smaller legacy data centers built a decade or more ago that cannot handle the HPC power and cooling needs, and small regional colocation operators located in dense urban areas, which cannot expand their sites due to prohibitive costs or cannot handle high-density workloads.”

D CEO: What are your predictions for the biggest challenges and opportunities in 2025?  

RARESHIDE: “The biggest opportunities include specialized data centers: The near-term data center customer demand is nonstop for the next few years, so major opportunities are there. AI and HPC workloads are fueling demand for purpose-built data centers with high-performance computing capabilities. Data center developers and operators that can deliver facilities optimized for AI (e.g., liquid cooling, high-density designs) will gain a competitive edge. 

The biggest challenges are threefold:  

• Utility Delays: The ability of utilities to deliver the hundreds of megawatts required by hyperscale and AI customers will be a bottleneck.  
• Supply Chain Constraints: Across the sector, there are long lead times for critical equipment. Extended timelines for transformers, generators, and other essential components (24-plus months in some cases) are creating planning challenges.  
• Higher and Higher Rack Densities: AI workloads, powered by GPUs, TPUs, and custom accelerators, require higher rack densities than traditional computing. What used to be a “standard” of 5KW/rack now can exceed 30KW/rack (and heading towards 100+KW/rack). Managing the heat generated by these systems is a critical challenge. Air-cooled may not meet these heat loads, so emerging technologies like liquid and immersion cooling systems can efficiently handle high heat loads from dense AI racks.”

D CEO: Anything else you’d like to add? 

RARESHIDE: “It is a very exciting time to be in the data center sector, and we are as busy as we have ever been. Data center technology and design continue to transform to meet customer demands. So many companies are working on best practices. Innovations like liquid cooling, hydrogen-powered generators, and on-site microgrids are new promising technologies that can future-proof data centers. In addition, sustainability can also be a differentiator. Companies that invest in renewable energy, energy storage, and net-zero carbon technologies can position themselves as leaders.” 

For the complete D CEO article featuring insights from other industry leaders, click here.