Tech companies shift metro strategy for new data centers

Data centers are expanding everywhere, yet many developers and large users are shifting strategies, choosing non-urban areas to avoid community pushback and rising utility costs in more densely populated regions. Northern Virginia has the highest concentration of data centers and is seeing the most in development. Other metros with a significant share of legacy data centers include New York, Dallas, Atlanta, Chicago, Denver, and San Jose.

• The largest tech companies—Amazon, Meta, Microsoft, Google, and OpenAI—are building most of the new ‘hyperscale’ or gigabyte-level data centers for their own AI purposes and are often at the center of the local pushback efforts. To avoid community opposition in larger metros, these companies are opting for more remote locations, including non-metro areas. Leading destinations include Columbus (OH), South Bend (IN), Scranton (PA), Jackson (MS), Racine (WI), and Abilene (TX).

• These smaller metros are largely in states with lower electricity costs. States with the highest electricity prices include Hawaii, California, Connecticut, Rhode Island, and Massachusetts. California and many Northeast states have also seen the fastest increase in electricity rates.

• Rising costs have not only spurred these data center diversification strategies but also pushed many to seek new solutions to the energy issue. Some are investing in nuclear reactors, including small modular reactors, or considering other alternatives such as renewables, natural gas turbines, or even exploring outer space as the next frontier. Many states, however, still rely on nuclear power plants, led by Illinois, Pennsylvania, South Carolina, Georgia, and Alabama.