Understanding Data Center Development: A Legal Guide for North Carolina

Gobena and Associates

North Carolina has emerged as one of the nation's fastest-growing data center markets. With major technology companies like Amazon, Microsoft, Google, and Meta investing billions of dollars in the state, understanding how data center development works has never been more critical for property owners, developers, and investors.

With over 24 years of legal experience serving clients from our offices in Charlotte and Saint Paul, we've watched the data center industry evolve from a niche market to a cornerstone of North Carolina's economic development strategy. This guide explains the data center development process and the legal expertise required at each stage.

What Makes Data Centers Different?

Data centers aren't typical commercial buildings. These facilities house the servers, storage systems, and networking equipment that power our digital world—from streaming services and cloud storage to artificial intelligence and financial transactions.

The unique requirements of data centers create distinct legal challenges:

Massive power requirements: A single data center can consume as much electricity as 100,000 households
Specialized infrastructure: Redundant power systems, advanced cooling, and fiber connectivity
Speed-to-market pressures: Technology companies need facilities operational within 18-24 months
Substantial investment: Projects routinely exceed $500 million to $1 billion
Complex regulatory environment: Multiple layers of local, state, and federal requirements

The Data Center Development Timeline

Understanding the development process helps property owners and developers anticipate legal needs and avoid costly delays.

Phase 1: Site Selection (3-6 months)

The process begins when technology companies or data center developers identify potential locations. North Carolina's appeal includes:

Competitive electricity costs
Available power capacity from Duke Energy and municipal utilities
Fiber infrastructure connecting to major internet exchange points
Lower risk of natural disasters compared to coastal regions
Favorable tax treatment through programs like Article 3J

Legal services needed:

Confidentiality agreements (site selection often occurs under strict non-disclosure)
Option agreements securing rights to purchase while conducting due diligence
Preliminary zoning and land use analysis
Initial meetings with local government officials

Phase 2: Site Control and Due Diligence (3-6 months)

Once a preferred site is identified, developers must secure control of the property and verify its suitability.

Legal services needed:

Purchase and sale agreements with data center-specific contingencies
Phase I and Phase II environmental assessments coordination
ALTA/NSPS land title surveys
Title examination and resolution of title defects
Utility capacity verification and preliminary utility agreements
Geotechnical investigations
Wetlands delineation and permits
Traffic impact studies

Phase 3: Entitlements and Approvals (6-12 months)

Securing necessary governmental approvals often represents the most complex phase of development.

Legal services needed:

Zoning and Land Use:

Rezoning applications (many jurisdictions require industrial zoning)
Conditional use permits for high-power industrial facilities
Site plan review and approval
Development agreement negotiations with municipalities
Public hearing preparation and representation

Economic Development Incentives:

North Carolina Article 3J property tax abatement applications
Job creation tax credits
Infrastructure development grants
Utility rate negotiations
Performance agreements with job creation requirements

Utility Infrastructure:

Electric service agreements (often 100+ megawatts)
Substation development agreements
Transmission line easements
Backup generator permits
Natural gas service agreements (if applicable)
Water and sewer capacity allocation

Environmental Permits:

Air quality permits for generators
Stormwater management permits
Erosion control plans
Stream buffer determinations
Endangered species assessments

Phase 4: Financing and Final Agreements (2-4 months)

With entitlements secured, developers finalize financing and execute definitive agreements.

Legal services needed:

Construction loan documentation
Permanent financing structures
Assignment of purchase agreements to development entities
Development agreement finalization
Contractor selection and construction contracts
Architect and engineering agreements
Equipment procurement contracts

Phase 5: Construction and Completion (12-24 months)

Construction of data centers proceeds on aggressive timelines with little tolerance for delay.

Legal services needed:

Construction contract administration
Change order review and approval
Lien waiver procedures
Building permit compliance
Inspection coordination
Utility interconnection completion
Certificate of occupancy procurement
Final survey and as-built documentation

Common Legal Challenges in Data Center Development

Our experience has identified recurring legal issues that can derail projects:

Power Availability and Timing

The single largest constraint on data center development is available electrical power. North Carolina utilities are experiencing unprecedented demand, and power delivery timelines have extended significantly.

Legal solutions:

Early engagement with utilities to reserve capacity
Power purchase agreements with take-or-pay provisions
Behind-the-meter generation options
Load curtailment agreements for flexible operations

Community Opposition

Not all communities welcome data centers. Concerns about electricity costs, water usage, and limited job creation have led some municipalities to reject proposals.

Legal solutions:

Proactive community engagement strategies
Economic impact analysis demonstrating benefits
Development agreements with community benefit provisions
Careful site selection avoiding residential proximity

Zoning and Compatibility

Many suitable sites lack appropriate zoning for data center use.

Legal solutions:

Conditional zoning with specific development standards
Planned unit development approvals
Special use permits with conditions addressing concerns
Legislative zoning amendments where appropriate

Incentive Compliance

North Carolina's Article 3J program offers substantial property tax abatements but requires strict compliance with job creation and investment thresholds.

Legal solutions:

Careful structuring of qualifying investments
Multi-year phase planning to maintain eligibility
Regular compliance monitoring and reporting
Relationship management with local tax administrators

Why North Carolina Continues to Attract Data Centers

Several factors explain North Carolina's data center success:

The NC Data Center Corridor: Western North Carolina counties including Catawba, Caldwell, Alexander, Burke, and Iredell have created a collaborative economic development approach, offering streamlined approvals and competitive incentives.

Strategic location: North Carolina sits within 700 miles of half the U.S. population, minimizing data transmission latency for East Coast users.

Fiber infrastructure: The state's telecommunications infrastructure, developed to support the Research Triangle's technology sector, provides robust connectivity.

Stable regulatory environment: Predictable permitting processes and business-friendly policies attract long-term infrastructure investment.

Renewable energy leadership: North Carolina ranks among the top states for solar energy generation, helping companies meet sustainability commitments.

How Gobena and Associates Supports Data Center Development

With offices in Charlotte and Saint Paul, Minnesota, we provide comprehensive legal services throughout the data center development process. Our 23 years of experience in commercial real estate transactions, combined with our focus on technology infrastructure projects, positions us to help clients navigate this specialized field.

Our Services Include:

Site Acquisition and Control

Option agreements and purchase contracts
Due diligence coordination and management
Title examination and survey review
Environmental assessment oversight

Entitlements and Approvals

Zoning applications and conditional use permits
Economic development incentive negotiations
Development agreement drafting and negotiation
Public hearing preparation and representation

Infrastructure Agreements

Utility service agreements and interconnections
Easement negotiations (access, utility, fiber)
Road improvement and dedication agreements
Water and sewer allocation contracts

Project Documentation

Construction contracts and general conditions
Design-build agreements
Equipment procurement contracts
Financing documentation support

Ongoing Compliance

Incentive compliance monitoring
Tax abatement reporting requirements
Development agreement performance tracking

Our Approach

We understand that data center developers operate on tight timelines with little tolerance for delay. Our practice emphasizes:

Rapid response: We return calls and emails within hours, not days
Proactive problem-solving: Anticipating issues before they become obstacles
Local relationships: Established connections with municipalities, utilities, and economic development professionals
Fixed-fee structures: Predictable legal costs for defined project phases
Multi-state capability: Our Minnesota and North Carolina offices serve clients with projects in multiple markets

Recent Data Center Activity in North Carolina

The scale of recent announcements demonstrates the market's momentum:

Amazon Web Services: $10 billion investment in Richmond County, the largest single capital project in state history
Microsoft: $1 billion commitment for four data centers in Catawba County
Google: Expansion of existing Caldwell County facility under consideration
Apple: Catawba County facility included in company's $500 billion U.S. investment plan
Meta (Facebook): Multiple facilities across western North Carolina counties

Charlotte and Raleigh markets combined now have over 113 megawatts under construction—fifteen times the previous peak—and approximately 90% of new capacity is already pre-leased, demonstrating sustained demand.

Advice for Property Owners

If you own large parcels (50+ acres) in North Carolina with industrial zoning or development potential, you may receive inquiries from data center developers or site selection consultants.

Key considerations:

Maintain confidentiality: Site selection often occurs under strict non-disclosure agreements. Premature disclosure can terminate a company's interest.

Understand option agreements: Developers typically request options to purchase while conducting due diligence. These agreements should compensate you for the exclusive right while protecting your interests if the option isn't exercised.

Verify developer credibility: Not every inquiry represents a serious buyer. Qualified developers should demonstrate financial capacity and previous project experience.

Seek experienced counsel early: Legal review before signing preliminary agreements prevents problems later. Many property owners inadvertently grant rights that significantly exceed industry norms.

Consider tax implications: Large sales may trigger substantial tax liability. Advanced planning can minimize tax exposure through installment sales, 1031 exchanges, or other strategies.

Advice for Developers

Successfully developing data centers in North Carolina requires understanding both the technical requirements and the local approval environment.

Best practices:

Engage municipalities early: Local officials appreciate early notification of major projects. Preliminary discussions identify potential issues before public processes begin.

Understand community concerns: Address electricity costs, tax revenue distribution, and employment impacts proactively rather than defensively.

Build utility relationships: Power availability determines project feasibility. Early utility engagement and willingness to fund infrastructure improvements demonstrate serious intent.

Structure incentives carefully: North Carolina offers attractive incentives, but eligibility requirements are specific. Ensure project structure qualifies before relying on projected benefits.

Plan for multiple phases: Phased development allows flexibility in responding to market demand while maintaining incentive eligibility for each phase.

Select experienced local counsel: National law firms often need local counsel familiar with North Carolina procedures, relationships, and practices. Early involvement of local counsel streamlines approvals and prevents costly mistakes.

The Future of Data Center Development in North Carolina

Several trends will shape the market's evolution:

Artificial intelligence demand: AI applications require significantly more computing power than traditional cloud services, driving unprecedented data center construction.

Power constraints: Available electrical capacity, not land or capital, increasingly limits development. Projects that secure power commitments gain competitive advantages.

Sustainability requirements: Corporate commitments to carbon-free energy drive demand for renewable power sources and efficient cooling systems.

Edge computing expansion: Beyond hyperscale facilities, smaller edge data centers closer to end users will create opportunities in secondary markets.

Regulatory adaptation: State and local governments continue refining policies to balance economic development benefits against community impacts.

Getting Started

Whether you're a property owner who has received inquiries, a developer planning North Carolina projects, or an investor exploring the data center market, experienced legal counsel can help you navigate this complex and fast-moving industry.

At Gobena and Associates, we combine deep commercial real estate experience with a focus on technology infrastructure development. Our responsive service, local relationships, and understanding of both legal and business considerations make us a valuable partner throughout the development process.

Contact Us

We welcome the opportunity to discuss your data center development needs or answer questions about the development process.

Charlotte Office:
Ballantyne One
15720 Brixham Hill Avenue, Suite 300
Charlotte, NC 28277
Phone: [Your Charlotte Phone]

Saint Paul Office:
2147 University Ave West, Ste 117
Saint Paul, MN 55114
Phone: 1-888-GOBENA5

Email: Israel@gobenalaw.com
Website: www.gobena-law.com

This article provides general information about data center development and legal considerations. It does not constitute legal advice. Specific legal questions should be directed to qualified counsel familiar with your particular situation.

Gobena & Associates
Gobena & Associates is founded in 2002 and has over 24 years of legal experience serving commercial real estate clients. With offices in Charlotte, North Carolina and Saint Paul, Minnesota, the firm focuses on complex commercial transactions, with particular emphasis on technology infrastructure development. Offices in Saint Paul, MN and Charlotte NC. Member of NAIOP Charlotte.