The United States Army and Air Force are moving to lease out underused base land, so far in Texas, Utah and Alaska, to private developers to build and run data centers expected to support artificial intelligence and military applications.
The effort follows an executive order President Donald Trump issued last summer directing the Defense, Interior and Energy departments to identify federal sites, streamline environmental reviews and competitively lease out land for projects with 100 megawatts or more of capacity. That's roughly the power equivalent needed to run at least 100,000 households.
The policy effectively positions federal land as a new supply channel for large-scale data center development, aiming to bypass land constraints and entitlement friction that slow projects in established hubs. The initiative could open up thousands of acres of government land, though the proposed deal structures introduce underwriting and operational issues that differ from traditional commercial real estate transactions.
Military bases offer several characteristics data center developers typically seek, including large tracts of available land, established security perimeters and, in many cases, separation from residential areas. The proposed sites are mostly remote — including the installations in Utah and Alaska — though some are closer to population centers.
In March, the Army conditionally selected developers for two large tracts, tapping Carlyle to negotiate a roughly 1,384-acre project at Fort Bliss in Texas, and data center operator CyrusOne, controlled by KKR and BlackRock, to negotiate for about 1,201 acres at Dugway Proving Ground in Utah. The Army projects initial operating capability at Fort Bliss by fiscal 2027 and at Dugway by 2029.
The Army doesn't want to collect regular rent payments like a typical landlord. Instead, it prefers to be paid "in kind" — meaning developers might build infrastructure on the base, supply electricity or give the government access to computing power instead of paying cash.
The approach poses challenges. Analysts say the in-kind approach makes it harder to predict and value the project's income because the benefits aren't straightforward, dollar-based cash flows.
Ongoing negotiations
Lt. Col. Marty Meiners, an Army public affairs officer, told CoStar News in an email that negotiations are still ongoing and that stipulations include the in-kind consideration, while developers would be free to sell excess capacity.
Federal contracting documents show the Army is also evaluating Fort Hood in Texas and Fort Bragg in North Carolina for additional development.
"AI is a strategic asset for the Army," Army Secretary Dan Driscoll said in a statement. "It is a force multiplier, supports future transformation and requirements, keeps the Army ahead of our adversaries, and generates resiliency across the force."
Carlyle declined to comment to CoStar News. CyrusOne did not respond to requests for comment.
In April, the Air Force offered 4,700 acres across three installations in Alaska: Joint Base Elmendorf-Richardson in Anchorage; Eielson Air Force Base in Fairbanks; and Clear Space Force Station, located in the state's interior. Lease proposals are due June 29.
Robert Moriarty, deputy assistant secretary of the Air Force for installations, described the offering as a public-private partnership intended to support AI-industry demand while generating value for Air Force missions.
Air Force seeks cash
The model differs from the Army's in a key respect: The Air Force is seeking cash rent at fair market value rather than in-kind consideration. The broader framework still includes long-term ground-lease concepts, as well as environmental review and mission-related constraints that can affect development timelines and operating assumptions.
Mission-compatibility requirements, among other factors, could prove decisive, analysts said.
"Site selection on military or other U.S. federal agency land is essentially a multi-constraint optimization problem," Nancy Morgan, former U.S. intelligence community chief data officer, said in a recent analysis published by Academy Securities, a veteran-owned investment bank. "Power, water, fiber, environmental compliance, and mission compatibility all need to align before a parcel is deemed viable. National security considerations further complicate the calculus."
Power availability and limited community resistance are increasingly important siting criteria for the data center sector, Stav Gaon, head of securitized products research at Academy Securities, said in the analysis.
Gaon also pointed to investment risks associated with ground-lease structures, including long leaseholds with potential extensions tied to national defense, as well as the impact of rent resets to fair market value.
He cited historical examples of distress tied to lease expirations and rent resets, where cost increases can compress cash flow and reduce returns. He added that noncash rent components can further complicate valuation compared with underwriting a straightforward stream of ground-rent payments.