Finocchio & Ustra Sociedade de Advogados | View firm profile
The data center market in Brazil is currently experiencing significant growth. With the increasing use of artificial intelligence and cloud applications,having larger and more powerful data centers has become not just strategic, but a critical necessity. This applies to both in-house operations and outsourced services.
Brazil offers clear advantages for establishing data centers. Data centers require properties with substantial areas, which demand access to telecommunications infrastructure and high levels of security. They also require considerable amounts of energy to ensure operational stability. Brazil has a favorable mix, including a strong capacity for energy generation—primarily from renewable sources such as wind and solar—and the availability of large plots in developed urban centers (which meet the aforementioned infrastructure and security needs).
Thus, there is a sort of “gold rush” when it comes to acquiring properties suitable for data center operations in Brazil. Real estate operations have a well-known characteristic: they are non-renewable assets, meaning once a property is allocated for a specific use, it is no longer available for other purposes. As a result, properties capable of housing data centers have become an attractive investment option.
Some of the most used contractual arrangements to accommodate data center operations include:
- Property leases (with or without an option to purchase);
- Built to suit;
- Sale and leaseback;
- Surface rights;
- Real estate partnerships between property owners and data center operators (with profit sharing);
- Property sales.
The choice of one option over another depends on various factors, such as the scale of the project, the intended use (in-house or outsourced operations), availability of financing (especially in sale and leaseback and built-to-suit arrangements), and other considerations.
Authors:
Luis Felipe Dalmedico Silveira, partner
Maria Vitória Resende Alves de Queiroz Telles, lawyer
Gabriel Cano Sartori, lawyer