As artificial intelligence booms and our digital world grows, so does the demand for data centers. In August, Liz Young of The Wall Street Journal published an article about the growth in the data-center market and the increasing demand for these specialized buildings. The article explains the reasons for such demand while also addressing some of the challenges surrounding data center development.
Liz notes that the demand for data centers has surged due to an increased interest in generative artificial intelligence, machine learning technologies, and cloud computing. As a result, several tech giants, including Google, Microsoft and Amazon Web Services, have started to lease, buy, or build space over the past four years to power things such as AI chatbots, apps, and store emails and photos in the cloud. Companies have leased nearly 3 gigawatts of data-center capacity in North America in the first half of 2024, which is up from 1.4 gigawatts in the first half of 2023. Moreover, capacity in North America’s largest data-center markets, such as Dallas, Chicago, and northern Virginia, increased 26% last year from 2022. Liz highlights that the data-center sector has 98 gigawatts of new capacity in the planning stages and is expected to come online over the next decade.
The article also suggests that data centers will continue to be in demand for the near future. Liz notes that one California-based developer intends to develop a gigawatt of data-center capacity over the next five years, which is equivalent to what it takes to power approximately 876,000 homes. Further, Amazon – which recently received zoning approval to construct a new data center campus in Luzerne County, Pennsylvania – intends to spend more than 100 billion over the next decade on data centers.
Despite the increasing demand for these specialized buildings, there are some significant obstacles to development. First, and most critically, the facilities are extremely expensive. It costs approximately $600 to $1,100 per gross square foot or $7 million to $12 million per megawatt of commissioned IT load to build a data center. Data centers also require access to huge amounts of power to run and cool the servers, routers and other hardware. On the other hand, there are upsides to data centers when compared to traditional industrial development. For one, data centers generally produce much less traffic than warehouses or wholesale trade establishments.
Like any new or burgeoning use, it is important for municipalities to adopt regulations that address the specific impacts and demands of data centers. Attempting to shoehorn a data center into other industrial use categories may result in a regulatory framework that works against both the municipality and the developer alike. If you have any questions concerning this post or industrial development generally, do not hesitate to contact a member of the McNees Wallace & Nurick Land Use Group.
