Global demand for digital infrastructure has never been stronger. Cloud computing, artificial intelligence, and everyday digital life are driving record investment in new capacity. But to secure growth, it’s essential to treat land as a strategic risk asset – bringing significant value, but also introducing severe exposures from power availability to planning permissions. Should issues emerge, Warranty and Indemnity (W&I) insurance offers investors a cleaner route to protect value and keep their growth story investable.
Understanding land risk
Accelerating demand for new data centres is reshaping investment portfolios and redefining the global real estate sector. But before new data centres can be brought online, investors and developers must first purchase the land on which to build them.
This is no mean feat. Micro-data centres are becoming more common, bringing edge computing, faster deployment, and scalable capacity to many modern businesses. But among standard facilities, even the smallest typically occupy between 5,000–20,000 square feet (opens a new window) of land. The largest hyperscalers, most of which are to be found in the US and China, can comfortably exceed 1 million sq. ft.
But land is not without risk. Power is the first test: can the grid deliver the capacity owners need at the right resilience level, or will they have to bring on-site or near-site generation? Likewise, climate and environment perils, legal and regulatory obstacles, and community opposition are all critical factors (opens a new window) that must be considered.
Investors’ land bet
For investors and developers, acquiring land is not only that – it’s an investment into future buildings, more megawatts, and greater revenue. The risk of backing the wrong site is stark. A failed prospect can mean spiralling losses from sunk development costs, stranded capital, and reputational damage that undermines future fundraising.
As such, land isn’t just a planning issue, but a strategic one – with the potential to make or break a business growth story. Even a development that looks strong on paper – with land secured, permissions granted, and clear growth pipeline – still faces a question: will consents hold as ESG expectations tighten, or will future phases be cut back or delayed? Rather than being addressed and resolved at the outset, tensions around land can play out during the planning process in real time. As a result, a new acquisition becomes a bet on whether the business keeps running and growing.
When multiple investors are involved, the risk landscape becomes more complex. Several parties may share exposure to the same assets, contracts, and operational risks. If a serious issue emerges, it isn’t clear whose balance sheet takes the hit. Share purchase agreements can spell out who owns the land, what permissions exist, and how much more can be built. But if those permissions are missing, fragile, or cut back, the growth story may be in doubt before construction has even begun.
Insuring future growth
Risk, site selection, and investment leaders who stay ahead will treat land as a strategic risk asset from day one – testing power, climate, sovereignty, community and continuity together, and carrying that lens into deal structures and insurance. In high-value, high-stakes transactions, cover is only as strong as the due diligence that underpins it.
W&I insurance sits above this complexity. On multi-investor platforms, W&I offers a cleaner route when issues emerge after a deal: investors claim on an insurance policy, not the business or its shareholders.
Benefits of W&I insurance, include:
A faster sales process.
A clean exit for sellers.
Most importantly, when investing in a platform, it allows an investor recourse without having to take action against the data centre platform, thus maintaining business relationships.
W&I cover helps level the playing field between investor classes, and acts as a backstop to the growth story in the sale-and-purchase agreement. Even if it cannot fix weak planning or ESG headwinds, it’s one tool to help make your growth pipeline investable.
Talk to us
Turning land risk into insurable growth requires a joined-up team that connects property, people, and risk across borders. Giving decision-makers clarity on power, permissions, and planning, can enable them to move forward with confidence. Contact us to explore how strategic insurance solutions can underpin your growth story.
For more information, reach out to a member of our team.
