Data center growth is reshaping U.S. real estate: What does it mean for legal teams?

Data centers have become a major area of U.S. commercial real estate.

Demand from AI, cloud computing and hyperscale operators is accelerating investment in digital infrastructure. JLL’s report, data center demand exceeds expectations in H1 2026 , shows how quickly that demand is growing.

AI data centers and hyperscale data centers require significant land, power and supporting infrastructure. That means developers are not competing only for suitable sites, but also for the resources needed to make those sites work.

For legal teams, the challenge goes beyond a rising volume of transactions. Data center development brings together real estate, power supply, land use, construction, environmental review and commercial contracting. A decision in any one of those areas can determine whether a project keeps moving.

That brings In-house legal recruitment at hyperscalers and othe data center developers into the conversation much earlier: which risks need someone inside the business to own them? And which can remain with external counsel?

Data centers are not a conventional real estate play

For a data center, access to power can matter as much as the land itself.

CBRE’s North America Data Center Trends H1 2026 identifies power availability and infrastructure delivery timelines as major factors influencing site selection, leasing and pricing.

So site selection is not simply about finding the right location. Developers also need to know whether enough power can be secured, when a utility interconnection can be delivered and whether new substations, power lines or other critical infrastructure will be needed.

Real estate teams may be considering land acquisition, zoning and entitlements at the same time as power purchase agreements, environmental requirements, tax incentives and grid connections. Water can be part of the picture too. Depending on the cooling system, its availability and use may affect environmental review, planning and community engagement.

These issues cannot always be handled one after another. A site may look commercially attractive and still become unviable if power is delayed or land use approvals cannot be secured. That is why legal teams need a seat at the table early.

Why traditional real estate due diligence is not enough

As competition for suitable sites grows, due diligence needs to look at the whole project, not just whether the land can be acquired.

Depending on the project, legal teams may need to consider:

• Land acquisition and development agreements
• Zoning, entitlement and land use approvals
• Environmental review and permitting
• Utility interconnection and grid capacity
• Power purchase agreements
• Construction and EPC contracts
• Tax incentives, tax credits and sales tax exemptions
• Project finance and joint ventures
• Leasing and colocation arrangements
• Customer contracts and service level agreements (SLAs)

These workstreams are closely connected. A delay in utility interconnection can affect construction and project finance. A zoning issue can change the development footprint. Changes to power availability can affect commitments to colocation customers or hyperscale tenants.

The legal team therefore needs visibility across the project rather than responsibility for isolated elements.

Local approvals are changing the risk profile

As data center development expands, municipalities and local communities are looking more closely at proposed projects. Large projects can raise concerns around land use, noise, water consumption and pressure on the local power supply. Questions can also arise around who pays for new infrastructure and the potential impact on ratepayers.

Some jurisdictions have introduced tighter approvals or moratoriums while assessing further development. For legal teams, this makes the local regulatory environment an important part of site selection and due diligence. Identifying potential planning, environmental or political challenges early can be critical where new substations, power lines or significant water supply are required.

These pressures also help explain how the North American energy transition and AI driven infrastructure will reshape legal hiring, increasing demands for lawyers with experience across energy regulation, land development and infrastructure transactions.

More investment means more complex transactions

The growth of data centers is also changing how projects are funded and structured. Competition for stabilized assets, combined with the cost of new development, is encouraging investors to consider development partnerships, joint ventures and platform investments alongside direct acquisitions.

That can leave legal teams supporting corporate structures, project finance, construction risk, utility arrangements and leasing or colocation agreements at the same time. For General Counsel, the challenge is often coordination.

Different external law firms may advise on real estate, energy, construction, environmental matters and corporate transactions. Someone inside the business still needs to understand how those workstreams affect one another and where a decision in one area creates risk elsewhere.

What does the right legal team look like?

Data center growth creates an unusual legal talent requirement. A traditional real estate lawyer may understand acquisition, leasing, zoning and development but have limited exposure to utility interconnection or power purchase agreements. An energy lawyer may understand the power grid but have less experience with construction or land use.

Commercial lawyers may also become important once a facility is operational, particularly where colocation contracts and service level agreements form a significant part of the business model.

The strongest teams do not necessarily need one lawyer who can do everything. They do need clarity around where the necessary capabilities sit. This overlap also raises an important question for employers: what does a data center lawyer do? The answer increasingly spans real estate, energy, construction, privacy and commercial experience rather than one conventional legal specialism.

Relevant experience can include:

• Real estate and data center development
• Energy and critical infrastructure
• Land use and zoning
• Construction
• Project finance and joint ventures
• Commercial contracting
• Environmental and regulatory matters

That does not mean every business needs a dedicated “data center lawyer”. It means employers need to understand which parts of the project lifecycle their existing legal team can support and where specialist capability is missing.

When is it time to build capability in-house?

An initial project can often be supported through existing legal capacity and external counsel. That becomes harder as the pipeline grows. Warning signs include the GC spending more time coordinating advisers, several developments moving forward simultaneously, outside counsel spend rising without clear internal ownership or specialist knowledge sitting entirely outside the business.

At that point, it is worth asking whether this is still just a workload issue. If the GC is increasingly acting as the link between several specialist external advisers, the business may have reached the stage where more expertise needs to sit in-house.

The right hire will depend on the business model. An operator developing its own facilities may prioritize real estate, construction and power experience. An investor building through acquisitions and joint ventures may need stronger corporate and project finance capability.

A  colocation business may place greater emphasis on commercial contracts, SLAs and energy law experience while a hyperscaler might consider legal hires across all of the above practice areas.

The legal hire should reflect the risks most likely to determine whether the business can execute its growth strategy.

Legal capability needs to grow with the asset class

Data center growth is bringing technology, commercial real estate, energy and critical infrastructure closer together. For legal teams, that makes breadth and coordination increasingly important.

The question for employers is not simply whether they need more lawyers as investment grows. It is which legal issues are most likely to hold up delivery and whether the business has the expertise to manage them.

Businesses that answer those questions early will be better placed to build legal teams around the areas of greatest risk and opportunity. For legal leaders, the next step is to map the project lifecycle against current in-house capability, external counsel support and the gaps that could slow growth.