New York Governor Kathy Hochul signed an executive order on Tuesday that halts the issuance of environmental permits for data centers with a capacity of 50 megawatts or more. The freeze is set to last up to a year, although it does not specify an end date. Applications that have already been deemed complete will proceed, while others will be delayed indefinitely, according to reports from American Banker.
Key Details
The moratorium affects a sector where banks have lent an estimated $14.9 billion against data centers over the past year. However, analysts noted that large banks are not significantly concentrated in this property type relative to their core capital. The Federal Reserve Bank of Chicago indicated that the impact on existing financing may be limited, as permitting is not typically a risk that lenders price into their assessments. Andrew Giudici, global head of corporate, project and infrastructure finance at KBRA, stated that projects without necessary permits do not reach the credit markets at all.
Background
While the freeze may not immediately impact existing investments, it could hinder financing and construction for new data centers. Other regions such as Northern Virginia, Atlanta, and Dallas-Fort Worth are emerging as more dominant data center markets, which could further diminish New York's competitive position in this sector.
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The freeze on permits could lead to delays in new data center projects, affecting related financing and construction activities. This may impact the credit markets, particularly for firms involved in project financing and real estate investments. Investors will watch for updates on the status of the permitting process and any potential changes to the executive order in the coming months.