The race to build data centers is reshaping local economies faster than almost any other real estate trend. From 2023 to 2024, data center construction spending increased by 70%, more than triple the rate of any other property type. The sector is drawing billions in venture capital and now consumes up to eight percent of total U.S. electricity.
For local communities, that growth is arriving with both a windfall and a set of tradeoffs: improved fiber and broadband networks, short-term and permanent job gains, and large tax receipts on one side, with infrastructure demands, public health concerns, and general local opposition on the other. Data centers are coming; the question is how economic developers can help communities capture the benefits and manage the tradeoffs.
Why are there so many new data centers?
A data center is a facility used to house large computer systems. There are many types of data centers hosting different services, but today’s headline centers are mostly used for cloud computing, including massive hyper scalers, which host at least 5,000 servers and can be 60,000 square feet in size. Cloud computing is an on-demand computing service, which can be rented by consumers. These centers are used for various IT purposes like storage, networking, and software deployment.
Separately, AI training data centers use cloud-computing’s on-demand infrastructure with specialized hardware and storage to train Large Language Models (LLMs), like ChatGPT. The AI market is booming and driving data center growth through investments by such companies as Microsoft, OpenAI, Google, and AWS. As these companies search for sites, EDO leaders are often the ones asked to explain what a data center will mean for a community. This piece is built for those conversations: a guide to the benefits, costs, and tradeoffs that come up when a project is proposed.