Hillwood’s Industrial Head Reid Goetz on Data Center Boom

The Perot family made its first fortune on the wave of one technological revolution, and it is actively building to capitalize on the latest one.

Hillwood, headed by Ross Perot Jr., has spent more than 30 years developing AllianceTexas, an industrial airport that has grown into a 27,000-acre master-planned development north of Fort Worth. In that time, it has become a top destination for logistics firms and, increasingly, data centers.

With the rise of large language models and human-friendly chatbots, artificial intelligence firms — and the data centers that host their models — have become some of the biggest industrial tenants in DFW.

AllianceTexas now includes a 400-acre data center campus. Meta chose the area for its $1 billion hyperscale data center, which spans 2.5 million square feet and draws on wind energy.

Reid Goetz, who leads industrial development for Hillwood, is building facilities he hopes can continue to attract tech’s biggest names. Goetz spoke with The Real Deal about AI and real estate, the data center development boom and how to supply the power fueling it all. This conversation has been edited for length and clarity.

The technology driving much of this new demand — AI — is changing so fast that even the developers often don’t know what to expect in a year, let alone a decade. What are the constants that you know they need when you start building?

Over the past 35 years we’ve been planning for development over a large area with a private business mindset, kind of like acting like a city, but taking ranch land and building a development that caters to companies today and in the future. How do you do that?

One interesting example we use is about Highway 170, which connects Interstate 35 to Highway 114. We helped advance that design and dedicated the land to TxDOT for them to build the original section of the highway in 1993. They built frontage roads but preserved a 400-foot median. In every highway expansion project in the history of this country, you’ve taken two lanes and expanded outward. It’s very disruptive, it’s costly, and it takes forever. Well, we were able to have the highway planned so that everybody drove on the frontage lanes for 20 years, preserving a 400-foot median, and you could build out those main lanes, which are now complete, without disrupting current flows. It was efficient and cost-effective.

We are taking that same approach with underground utilities, which are really the big drivers of data centers today.

The internet didn’t even exist at the start of Alliance. But we’ve maintained pathways for future electrical and fiber extensions — not just like the five feet that you give them if you’re just thinking about your one site, but in certain cases, we’ve preserved 20-plus feet. Who knows what’s going to happen in the future?

Those little things add up over time. Instead of having to go to 100 different landowners to extend an electrical line, we already have those pathways in place. You can be fast, you can be adaptive. You can be flexible to the changes in the world economy.

When you’re looking to anticipate those changes in data centers specifically, what things are developers looking for?

At the moment, the core pillars are power and fiber connectivity. Water is also one, but, but that’s one that seems to be potentially changing in the future as cooling systems change within data centers. Power is number one, number two and number three, and fiber is right there behind it.

How long has Hillwood been working on data centers?

We’ve been doing data center work for at least 20 years or more, with some of the first enterprise users that came into Alliance. And we’ve got over six data centers today here. But it really took off when Facebook came in 2015.

We learned a lot about the modern internet age. The cloud was just starting, and that was when Instagram video was expanding, and the compute power and storage power required at that time was exponential. Well, now you look at autonomous cars and edge computing and AI: some of the numbers are exponential, in terms of demand.

AI models require enormous amounts of power, and developers are getting creative to find that. Microsoft wants to reopen Three Mile Island to draw on nuclear power, for example. How are you thinking about powering data centers?

We are on [Texas’ power grid] ERCOT, and so, it’s a state-level focus on generation. Nuclear is going to be big — I don’t think you’ll find this in a report, but when you hear people talk about how AI demand has the potential to consume as much electrical capacity as all that exists in the United States today — I mean, how do you solve for that?

You go with very heavy, very dense power generation. And technology seems to show that nuclear is the path, I think, and that’ll come down the road. As you look at Texas today, we have over 100 years of natural gas below ground to provide power generation, so there are bridge opportunities. If we were a country, we’d be the fifth-largest wind generating country in the world.

There have been some concerns about an oversupply of industrial space in DFW. Are you still seeing strong demand for data centers?

The market in DFW is fascinating. We have the second-largest data center market in the country, and we have 65 percent of that under construction, and it’s 90 percent pre-leased.

There’s more capital coming into space than ever. You have every major global investor and institution participating. You have traditional real estate companies participating in data center growth.

Everything’s cyclical. We have seen slowdowns in this space at different points in time, but right now, locally, it feels very strong.

Data centers are the new digital-age factories of America. It may ebb and flow in terms of the extremes of demand right now. It is still new relative to other asset classes, but in 20 years, we’ll think about it the same way that we do office and industrial and retail.