Q&A: Oppidan’s Drew Johnson on Data Center Development

This article originally appearing in Finance & Commerce here.

When Excelsior-based Oppidan Investment Co. began working in the data center sector about nine years ago, the company’s initial project met with some skepticism.

“To get our construction loan, we had to convince the bank that there was a path to convert it back to warehouse should this data center thing go away,” recalls Drew Johnson, Oppidan’s senior vice president of development in the Midwest Region.

That initial project, in northern Virginia, was delivered in 2018. Seven years later, it’s safe to say that data center development didn’t just go away. To date, Oppidan alone has delivered more than 10 million square feet of data center space with a combined value of about $5 billion. 

In the following interview, Johnson talks about data center development in the Twin Cities and beyond, among other things. The interview has been edited for length and clarity.

Q: I saw on Oppidan’s website that the company has done more than 10 million square feet of data center projects with a combined value of $4.9 billion and 2,800 megawatts of power. Tell me about that.

A: We delivered our first data center in 2018 and started working in the space in 2016. I was still also doing industrial mixed-use developments. Data centers, I think, had been around for a while. But as far as the interface on the real estate side, versus it being kind of a business-to-business deal, it was just in its infancy. 

The first data center we delivered in Northern Virginia in 2018, to get our construction loan, we had to convince the bank that there was a path to convert it back to warehouse should this data center thing go away. So we were showing knockouts for truck docks and trailer drops and parking, and talking about bay depths.

Needless to say that the pace has just accelerated since then. Since our first project in 2018, we’ve delivered on both coasts, working with a single tenant, started getting into multi-story builds. And then, the sites got larger, the power went up. We started getting into substation delivery, working very closely with utilities. And then, about three years ago, we landed another hyper-scale client that we’re delivering for nationally.

One of the projects nationally was just approved in Eagan, so we’re really excited about that. Those are smaller data centers. They’re designed to boost network and kind of simplify the compute as information is going over fiberoptic networks around the country.

Q: You mentioned the Eagan project, which I wrote about recently. How much of your data center activity is happening in Minnesota?

A: Minnesota has lagged behind, kind of on a national basis, on a lot of data center investments, so not much locally. That could change. We have good infrastructure here compared to a lot of places. We were doing one of these data centers [in another region] and we had to build … a surge tank so our sewer could dribble out overnight, because the city’s sewer capacity hadn’t received much investment, and it was becoming a barrier to developing any product in that city. My sense is, Minnesota doesn’t have those sorts of challenges. The water, sewer, power, roads, infrastructure is very sound compared to a lot of the other parts of the country that we develop in.

Minnesota is kind of interesting in that we have a comparable data center incentive that’s probably shared by half the states around the country. Ours isn’t quite as competitive as some of the other regions or some of the other states, but we have good infrastructure. We have a good workforce. We have a lot of construction talent. We have a data center incentives tax program through Minnesota Revenue.

But we’ve really lagged behind in data center investment, both on a per capita basis and on a relative basis. Areas like Des Moines and Omaha are much larger — despite being smaller cities and smaller MSAs — on their data center presence. You’d think that would start to change, even though some of our networking and our cost of power and our permitting timelines are longer. But we’ll see.

Q: At the same time, we are seeing some big projects. Amazon bought 348 acres for a big data center project in Becker. The $800 million Meta project is under construction in Rosemount. Do you believe we’re starting to go on that upward trajectory now?

A: I think we are and I think it’s going to be a little bit in fits and starts. We track all these projects and, to our knowledge, the project in Becker — and I think Microsoft also closed on land up there — we haven’t seen anything public for land use submittals or building permits. I think the project that’s furthest along is the CloudHQ project in Chaska. I think they’re 100% through the city. Meta is the only one that’s actually under construction.

It’s not like the sky is filled with tower cranes putting all of these things up. The projects are so big and the design timelines are so long that this idea where everything is going to be under construction at once — if anyone’s saying that — is not true. I think it’s going to be measured in five years, 10 years, as they ramp up and build, connect to power and so forth.

Q: What is your overall outlook for Twin Cities data center projects in 2025?

A: We hope to be under construction this summer/fall on our Eagan facility. Lead times are so long on so much of this big equipment. We joke that we usually order generators, transformers, HVAC units, wait three months and then start looking for land. And by the time you find land, design it, get it entitled, you can start construction. And your stuff has already been on order for months.

I don’t think there’s going to be much for 2025 starts here, just because the projects take so long and the lead times are so long. Could there be 2026, starts? I think so. But the buzz we’re hearing on media channels, this idea that someone’s going to wake up and then be surrounded by data centers and power lines, blackouts … these projects just take so long that it’s not the case. It’s not a light switch, or like a spec warehouse, where you just have to, if you’re entitled, just order steel and concrete panels, and then you’re off to the races. On these data centers, you have to order complicated mechanical and electrical systems years in advance for it to be ready at scale.

Q: Going back to the story about your first project, it’s amazing how far we’ve come in this space.

A: Completely. And even on the capital acceptance, as these projects get larger, there are so many more pension funds and institutional money that really like the data center space. … There’s so much money out there trying to get a return. And for these core groups, these insurance companies and pension funds that just want that stable de-risked 5% return, I think this credit-worthy data center build is really good for that capital market side.

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