Exclusive: DataBank CEO reveals challenges of data center expansion

  • DataBank is one of the largest data center companies in the U.S.

  • The company is expanding into secondary markets

  • The CEO told Fierce that costs are rising costs for land, labor and more

You may not know it, but the chances are pretty good that you live near one of DataBank’s facilities.

The company may not necessarily be a household name but it is one of the largest private data center platforms in the U.S. with 70 data centers in 25 markets. CEO Raul Martynek told Fierce in an exclusive interview that roughly 60% of the country’s population lives within 100 miles of one of its data centers.

How is this possible?

Well, Martynek said DataBank has been fleshing out its edge footprint with locations in secondary markets for years now. That is, it specifically targeted markets located outside traditional hubs like northern Virginia and Silicon Valley and Chicago, but close enough to cities and other key locations to still be able to serve customers. Think Boston, Cleveland, Denver, Indianapolis, Las Vegas, Kansas City and Miami.

According to the Martynek, DataBank began pursuing this strategy about five years ago, recognizing that construction in core markets couldn’t “go on forever.” (For what it’s worth, it seems several other players – including EdgeConnex, Flexential and VaporIO – have also been pushing out to the edge to varying degrees.)

“As people want to put workloads closer to the people that use them, you’re going to need to go from five markets in the U.S. to 25 markets in the U.S., or 30 markets,” he said of the company's thinking. “So that’s why we’ve built out the platform that we have.”

Like other data center operators Fierce has spoken to – including Digital Realty and T5 – Martynek highlighted a number of trends sweeping the data center industry, such as rapidly increasing campus sizes, growing power demand and changing cooling needs.

“When I got here in 2017, a 2 megawatt deal was considered a really big deal. You would have been doing backflips,” he said. “Now people are doing 300 megawatt deals.”

DataBank’s current projects are a little smaller than 300 megawatt deals, though. Martynek noted the company bought 95 acres in Atlanta to build a 120 megawatt facility there and also picked up 85 acres in Culpepper, a town just south of northern Virginia, where it plans to build a 192 megawatt data center campus.

Earlier this month, the company secured $725 million in financing to fuel additional builds in New York, Denver, Minneapolis, Salt Lake City and Dallas.

Data centers and rising costs

These projects don’t come cheap. The CEO noted rising land, labor, power and structural design costs all contribute to a higher price per megawatt to build. Where two to three years ago the price may have been around $8.5 million per megawatt, today “you can’t build for less than $10.5 million per megawatt,” he said. And that’s on the low end.

Martynek’s comments jibe with data from Statista which showed that in 2022 the cost to build a data center ranged from $9.8 million per megawatt to $12.4 million per megawatt, depending on the market.

Asked whether there’s a point at which building new facilities becomes too expensive, Martynek said that’s ultimately up to its customers.

“Our pricing is reflective of our input costs. If someone comes to me and says I need you to build me a data center that can support a 10,000-pound rack and 100 of them, guess what, my engineering team will be able to figure that out. Oh yeah, it’s going to be expensive. You’re going to be paying more than $145 per [kilowatt]. Mr. Customer will have to tell me if it’s worth it for him,” he explained.

“We’re certainly not going to build something that we can’t sell in the marketplace,” he concluded.