Energy-hungry data centers are quietly moving into cities

When you think of data centers, you probably picture a giant server farm in a rural area where electricity is cheap and tax breaks are plentiful. Big tech companies like Google, Amazon Web Services, Microsoft, and Meta have placed millions of square feet worth of server space in places like Northern Virginia or Hillsboro, Oregon. But now, to reduce lag times, companies are increasingly weaving nodes in their network into the fabric of cities. The One Wilshire building in Los Angeles, for example, formerly home to a network of law offices, now oversees one-third of all internet traffic between the US and Asia.

To the uninitiated, these urban physical internet nodes probably don’t look like much at all. And that’s by design. Equinix, the largest owner of colocation data centers with 10.9% of the world market, operates data centers that generally aren’t supposed to draw attention to themselves. In Dallas, the company owns a sprawling industrial building just outside the city center that doubles as a data center hub and the headquarters of a for-profit college. In Tokyo, the operation is largely conducted on various floors within the city’s sea of skyscrapers, “so you wouldn’t even know it’s there,” says Jim Poole, the company’s vice president of business development. In Sydney, Australia, Equinix is building a new data center in an expressionist style not unlike that of the city’s famed opera house. And around one of its facilities in Amsterdam, Equinix built a moat—less for security, Poole says, than to make the building match its surroundings, given that Amsterdam is a city of canals. “For the most part, people actually do try to make their buildings fit the environment,” he says, adding that sometimes local regulators even require it. 

The demand for such facilities, especially in urban centers, is growing quickly: last year, spending on colocation data centers jumped 11.7%. The biggest cloud companies are not far behind. Amazon Web Services has been pushing shrunk-down data centers, which it calls Local Zones, close to major population areas; so far, it has placed them in 32 cities across the US. The trend has even piqued the interest of Walmart, which may soon start renting out sections of its superstores to host data centers for third-party companies.

One explanation for the flurry of demand, Poole says, is that consumers themselves have changed. As more of our lives have gone online, “people’s tolerance for latency has continued to go down,” he says. The main drivers are those applications where a delay in the milliseconds can prove critical: you might not notice a quarter-second lag on Netflix, but you certainly will if you are using an online sports betting app, trading stocks, or participating in a multiplayer game like Fortnite.

Companies like Google, Amazon, and Microsoft, for instance, are betting on cloud gaming, which involves streaming games over the internet without a console or a phone to provide processing power. But many popular games, such as first-person shooters, “require a lot of quick reaction times and therefore really fast connectivity,” says Jabez Tan, the head of research at the firm Structure Research. And games like that will not function on a streaming service without the help of large numbers of data centers.