A lack of knowledge of how to value land sitting on AI Growth Zones could lead to over-inflated pricing for plots capable of hosting data centres and discourage investment, a Google expert has warned.
Speaking at UKREiiF in Leeds on Tuesday, Google strategic negotiator Daphne Adjei told delegates that the growth of the UK data centres sector could be held back by distorted valuations, and urged surveyors and valuers to avoid using a one-size-fits-all model when assessing sites.
AI Growth Zones were proposed by the government in its AI Opportunities Action Plan published in January and aim to "facilitate the accelerated build-out of AI data centres" through measures such as streamlined planning approval and speedier access to clean power.
Adjei called for the real estate sector to develop more of an understanding around AI Growth Zones and how the value of land identified for data centre projects in them is affected, warning inflated estimates could scare off investors.
She said: "The government [is] doing and saying lots of great things in relation to data centres and one of the key plans that they have put in place is AI Growth Zones.
"The whole essence of a Growth Zone is the government saying, 'okay, we are going to expedite power where we can, expedite planning permission where we can'.
AI Growth Zones
"For that to really materialise, I think sectors which are directly and indirectly impacted by an AI Growth Zone need to understand what it actually is.
"What I mean by that is, does a planning officer actually know what an AI Growth Zone is? Not just what a data centre application is, but a data centre which falls within an AI Growth Zone.
"Does, for example, a surveyor or valuer, who is carrying out a valuation, understand what the designation of an AI Growth Zone does to land values?
"I think at the moment valuers have almost a difficult job on their hands in the sense that, when you have your land per acre, how much of that land value is attributed to the fact that the land might have outline planning, how much of that land value is attributed to the fact that the land might have power, and what adjustments are being made to the land value because power might be in 2025 versus say 2030? And now you've got this added layer of AI Growth Zones.
"I think we need to make sure that there is still substance and evidence and justification to valuations, and it's not just a case of market value times ten, owing to the fact that land falls within an AI Growth Zone.
"What you don't want to happen is that investors are almost put off by these overinflated land values and it's actually preventing growth within the industry."
She also warned delegates in attendance that plans to diversify into data centre investment should not be taken lightly, explaining how developments of this type differ from other Use Class B8 projects.
Adjei said: "Just because data centres fall within Use Class B8 doesn't mean it should be treated the same way you treat traditional types of B8, so I'm talking open storage, warehouse, those sorts of assets.
"The reason I say this is because, if your business model is [about] promoting land for planning, say, have you considered things that you wouldn't necessarily consider for traditional B8 that you would need to for data centres.
"Some of these things include your end user's standard spec, so if their standard spec is that they build heights to 25 metres, but you are promoting land at outline planning for 15 metres, already you're at a loss.
Tunnel-vision fear
Adjei also called on local authorities to use the right metrics when dealing with applications for data centres, highlighting that they may bring different benefits to a community than a traditional industrial development. But said operators should be working to educates councils on these.
She said: "Some local authorities will apply metrics as part of the planning process and these metrics are relevant to say supermarkets or logistics, but they don't relate to data centres.
"An example of this is how jobs are reviewed in relation to data centres. Some local authorities have this metric where they say, 'for every square foot, there needs to be X amount of jobs being made available'.
"It's a relatively erroneous assumption to apply to data centres in the sense that it doesn't consider all the additional benefits that a data centre operator is able to bring, which perhaps aren't as quantifiable, but still have a significant impact in terms of jobs.
Adjei added: "You don't want to be left with a scenario where local authorities almost have tunnel vision because they don't understand the function of a data centre or what it is, and are using metrics which don't necessarily apply to data centres and at risk of slowing down the review process, slowing down the determination of an application, and therefore slowing down investment."
