It’s not the 1889 Oklahoma Land Rush, but potentially similar.
I’ve talked a lot about the trillion plus dollar AI data center rush in this AI Tech Wave, including some of the potential ‘bad harmonics’ impact of that in yesterday’s ‘AI Bigger Picture’. Another one coming to the fore is the crowding out of land uses of this AI data center capex rush, both in urban and rural areas.
The WSJ lays it out vividly in “The Data-Center Boom Eats Up a Lot of Land. Atlanta Says It’s Gone Too Far”, starting with Atlanta:
“Atlanta is pushing back against the rapid growth of data centers, reflecting concerns over land use and competition with other real estate needs.”
“Nationally, the data center sector has flourished, with total inventory increasing by 43% during 2023 and 2024. This growth is expected to continue as AI moves from training models to inference, requiring even more space and power.”
“Data center expansion has also been a boon to some office owners, who have filled empty floors by leasing to these companies. But lawmakers and residents in Atlanta are concerned that unchecked data-facility construction could make it harder for the city to address its housing shortage.”
Again, with data centers, the impact is outsized in its impact.
“But here, and across the Southeast’s biggest metropolitan area, demand for one type of real estate threatens to crowd out others: data centers.”
“Space to store and process data for everything people stream, scroll and swipe online is still in short supply. An artificial intelligence race among the world’s largest tech companies—the so-called “hyperscalers”—is driving a land rush for ever-larger computing facilities with plentiful power.”
“Data-center construction is growing faster in Atlanta than in just about any other major city. Measured by power capacity, it was up 76% in the metro area during the first half of 2024 compared with the same period a year prior, according to real-estate firm CBRE.”
“Meta, Alphabet’s Google, Microsoft and Elon Musk’s X all operate Atlanta area data centers, or are planning new ones. X secured a $10 million local tax break for an expansion this year.”
They came for good reasons:
“These firms and many other tech companies and property investors are attracted by the city’s cheap electricity, state tax incentives and existing fiber-optic infrastructure.”
“Now, Atlanta is pushing back. More residents and lawmakers worry that the pace of data-center growth—and the amount of land and resources being devoted to it—has gone too far. They say it is starting to compete with more pressing real estate needs, like housing and retail stores.”
Zoom out, and the impact is across the US:
“Nationally, the data-center sector has also flourished, even as property investor enthusiasm has waned for nearly every other type of real estate during this period of higher interest rates.”
“Total data-center inventory increased by an annual average of 43% during the years 2023 and 2024. That is compared with a less than 3% average increase in the total stock of multifamily buildings, hotels, self-storage and other property types over the same period, Green Street said.”
It spans urban and rural areas, including the northeast, the most concentrated area for AI data centers:
“Other cities and states where builders are creating new facilities en masse could follow in Atlanta’s footsteps by placing new limits on data centers. Fairfax County, in data-center mecca Northern Virginia, recently banned new centers from being built within one mile of rail stations.”
“The amount of growth we’ve seen the last few years, it’s really starting to catch people off guard,” said David Guarino, a data property analyst at Green Street.”
“Analysts say that devoting more space for computing and artificial intelligence is inevitable. As AI moves from training models to what the industry calls “inference” (when AI really starts working and becomes commercially viable), companies will require even more space and power than they do today. That could push more providers into places with the fastest possible internet connectivity, which tend to be major population centers.”
Indeed, there are areas, where the overcrowding issue is not the main pushback:
“Data centers are still finding new markets that welcome them. Amazon Web Services said earlier this year it would invest $10 billion in new data centers near Jackson, Miss., and Microsoft debuted plans recently for three data centers around New Albany, Ohio.”
“The majority of states offer some form of incentive for data centers, according to the Data Center Coalition, an industry trade group. Georgia, for example, offers sales tax benefits on equipment purchases, which can cost hundreds of millions of dollars at a single site. Data-center proponents say property and other tax revenues generated by centers more than make up for what is lost from sales tax forgiveness.”
And the Giga-watts of power demand are massive relative to regular uses, a point that I’ve discussed earlier. The WSJ continues:
“Georgia Power, the top utility company in that state, said this month that the power requests of potential economic development projects, which are predominantly data centers, could total 36,500 megawatts by the mid-2030s. Today, the utility has a total capacity of 21,500 megawatts, generated and purchased. The utility plans to publish a report with more details on how it will meet future demand in January.”
“There isn’t a single utility provider out there that isn’t being overburdened by requests,” said Guarino, the Green Street analyst.”
Those are big chunks of additional power that crowd out non AI uses, as well as accelerating the land and other demands on local infrastructure.
We’re going to see a lot more of these types of issues and debates in 2025, as this AI Tech Wave really builds steam.
They’ll have to be balanced somehow, just like prior infrastructure demands. Like the 1956 national highway Act that caused a crowding out impact on our urban and rural environments for decades. Not to mention Oklahoma of course in 1889. Stay tuned.
(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)
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