- Flexential's newly minted CEO dished on its expansion strategy
- Balancing ROI and capex is a challenge, he said
- The data center industry needs to get better at fighting PR battles, he added
Less than two weeks into his tenure as Flexential’s CEO, Ryan Mallory says there’s already something keeping him up at night.
Mallory told Fierce in an exclusive interview he’s essentially walking a tightrope, trying to balance tempting but capex-heavy projects with the need to deliver a return on investment. The question looming in his mind is: “How do I make sure that we don’t miss our window for execution?”
Global data center capex skyrocketed 51% year on year to $455 billion in 2024 and is expected to hit more than $1.2 trillion by 2029, according to Dell’Oro Group.
While hyperscalers are expected to account for the bulk of this spending, neo-clouds and co-location providers are also jumping on the expansion opportunity, often backed by private equity. (Heck, Flexential itself is backed by Morgan Stanley.) Still others are simply taking a build-it-and-they-will-come approach, which is, to say the least, risky business.
Against this frenzied backdrop, Mallory’s comments sound strangely sane.
For instance, he told Fierce that while the company – which operates data center co-location facilities in 19 markets across the U.S. – is regularly approached by customers looking to buy all of its capacity at once, that’s just “not the business that we’re in.”
To be clear, Flexential is eyeing an expansion of its footprint. But it’ll be nothing like the multiple gigawatt-scale projects others in the space are undertaking.
“We do get asked frequently to go into new markets. That’s everywhere from the emerging markets in the Deep South, Mississippi and Louisiana, all the way up to the Dakotas. So we are analyzing those right now,” he said. Mallory added Flexential has a sort of prospect scorecard it uses to evaluate the level of effort required to enter a new market. Think assessments of how easy or hard it will be to secure power, land and local support.
“I wouldn’t be surprised if you see from us in the next 12-plus months entrance into one of these new markets with a very strong anchor tenant that will really help us seed that market,” he hinted. “We’ve got a very strong capacity pipeline that we’re going to be bringing online kind of in early ’26 out through 2030.”
The PR challenge
Asked about hurdles that might slow down Flexential’s forward progress, Mallory said he isn’t really worried about supply chain issues or even power (that’s what the scorecard is for, remember). The thing he flags is public relations.
AI has turned data centers from background machinery into headlining technology. That shift has brought more scrutiny around what construction of these facilities means for local residents. The result has been a good deal of reporting that doesn’t exactly make data centers look good.
“It bothers me when I see communities reject data center deployments without a good understanding of what they can bring,” Mallory said. “This is an area that broadly, as an industry, we’ve got to get better at.”
Mallory argued that while there’s an impression that data centers will come in and take all of a community’s water, power and heating and be an eyesore, these ideas are outdated and the footprint of these facilities is no different from any other building. Plus, he said, they bring loads of tax benefits for local residents.
Mallory’s argument may be true for Flexential’s facilties: these only occupy 50-100 acres rather than the several hundred that new AI factories are landing on, and the company’s current largest facility is 36 megawatts rather than the 100 MW plus that others are building. But there are obviously very real problems elsewhere.
The CEO argued that rising power prices aren’t necessarily due to data centers and instead attributable to a shift from fossil fuels to “alternative sources,” which required construction of new infrastructure. But Fierce pushed back, noting utility companies have specifically pointed to data centers as the source of skyrocketing demand for power and transmission. His response?
“If I was in their shoes and hadn’t invested in infrastructure in 50 years, I would want a scapegoat, too,” he concluded. “We have to work together and make sure everybody pays their fair share.”