A recent trend you may be noticing as you hear about new projects in your area is the announcement of data center projects being developed. As with any new development, this raises questions from residents: How will this affect my community? What impact will I feel? And what happens inside a data center?
I will address these issues in the August edition of the Flex Focus newsletter and provide you with background information on the residential and commercial impacts. As much as I would like to put on my IT hat and provide you with in-depth details about cloud on-ramps and internet exchanges, the information below will be presented in layman's terms.
What is a Data Center?
A data center is a physical location that stores information for use on the internet, whether for business or personal purposes. Since the internet has become an integral part of our everyday lives, we as a society are generating more and more data. While our storage of this data has become easier with the advent of larger hard drives and cloud storage, this data still requires a physical location. The data that everyone is creating has become increasingly more valuable as a backup for critical systems, a means of studying customer behavior, in creating language models (AI), and even being able to have 1,000 of your 8th grade son’s football photos on demand at any second of the day. To satisfy this demand for security, speed, and storage, data centers are being developed everywhere with stable environmental conditions.
Data Center Example
What is in Data Center Development?
On the outside, a data center is built similarly to a traditional tilt-up concrete industrial building, with extra attention paid to physical security and cooling systems.
On the inside, if you’ve ever walked into your school or work server room, what you will see in a data center is a version of this on steroids wrapped in a giant HVAC system. Millions of miles of cable are being routed to servers that can enable your company to maintain its entire digital footprint in one location, with immediate access via the cloud.
The building is primarily designed to cool the servers. The cooling system for your house typically ranges from 3 to 5 tons, while a typical data center utilizes dozens of units with capacities exceeding 1,000 tons. These systems use water and air to cool the heat generated in the server room, so in addition to the units, they come with all the necessary equipment to store and handle air and water. The cost to cool comes in the form of energy and a complex site can require more than 100 megawatts of power capacity, which would be enough to power over 80,000 homes.
Data Center Cooling Unit
Redundancy is key; these systems are intended to never go offline. In a data center, you will find backup generators, servers, and HVAC systems, with essentially all systems duplicated to alleviate the concern of failure and maintain connectivity.
Data Center Layout Example
US Pipeline of Data Centers
By the end of 2025, North America is expected to have 1,427 data centers and 1,800 by the end of 2030
The major US markets for data centers are Northern Virginia, Chicago, Phoenix, and Atlanta, with emerging markets being Des Moines, IA, and Richmond, VA
The average vacancy rate of the primary markets was under 2% in 2024, and preleasing for data centers under development is expected to be 80% plus.
Data Centers Primary Markets Net Absorption, Preleasing, & Under Construction
How will this affect my local economy?
Data centers will impact local economies in both positive and negative ways through shifts in pricing and income. On the positive side, they create jobs, with a heavy balance of temporary construction jobs and permanent, high-paying jobs after the development is complete. The data centers will also contribute to the local economy through tax revenue, including income tax and property tax.
On the negative side, the increased development of data centers will strain the capacity of local construction companies, as data centers are long-term, more expensive projects. Consequently, contractors and subcontractors will be pulled from other local projects unless they are offered high compensation, driving up the overall development cost. The most noticeable impact on residents will be power consumption and cost.
For example, Columbus, Ohio, has been the hotbed of data center development in Buckeye State, with 120 of the 188 Ohio data centers located near the city. Residents, on average, saw a year-over-year increase of $27 per month in 2025.
How will it affect Commercial Real Estate?
Similarly to the local economy, data centers will increase the cost of power and development across the board. The impact on other sectors of real estate will come with an opportunity cost decision; investors and developers will have to decide which is more profitable: housing, retail, industrial, office, or data centers. As demand is strong in data centers, talent and money will be concentrated on development to meet the demand. The smaller the market, the bigger the impact. If a data center decides to develop in a market like Wapakoneta, where Flex is located, it will likely consume a larger portion of the existing power capacity and employ contractors and subcontractors locally who would otherwise be working on projects with similar economic benefits, which would be viewed more favorably by the public.
Data centers will be a critical sector of the commercial real estate world in the years to come. Understanding the impact these data centers have on the micro and macro environment will help Flex Real Estate understand what to expect if a project is announced next to our investment.
Flex Real Estate
In August, Flex Real Estate is proud to say we made $171,500 in distributions through our new investor software. The team conducted a diligent process to implement this software, creating an excellent experience for our partners. Additionally, these distributions were made in line with our business plans, with our performance on pace or ahead of the expected outcome. We hope to have more opportunities in the near future to offer to our partners.
Reply to this email and let me know if there are any specific topics you would like to hear about next. Thank you for reading, and stay tuned for the September Focus!
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