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Energy-hungry data centers are quietly moving into cities

Companies are pushing more server farms into the hearts of population centers.

The Western Union building
The Western Union Building, 60 Hudson Street, c. 1931.Library of Congress

In 1930, the telegraph giant Western Union put the finishing touches on its new crown jewel: a 24-story art deco building located at 60 Hudson Street in lower Manhattan. Soon after, over a million telegraphs each day shuttled in and out, carried by a network of cables, pneumatic tubes, and 30 employees in roller skates who sped across the building’s linoleum floors.

Today, much of it is home to vast halls of computer servers. It is a physical manifestation of the cloud: when you stream a TV show, upload a file to Dropbox, or visit a website, chances are you will be relying on the processing power of a data center just like it. Hundreds of companies rent out space in 60 Hudson Street, and it is one of a growing number of buildings, sometimes called “colocation centers” in industry parlance, that host data centers in or near major population centers.

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.

Or take the metaverse—the favorite, if sparingly sketched-out, new talking point of Nvidia, Meta (previously Facebook), and other tech giants. If a virtual-reality world is ever going to achieve mass appeal, it’s going to need to mirror the immediacy of our own. That means intricately detailed graphics, nimble motion, and audio reactions with hardly a millisecond of buffering. All told, writes Raja Koduri, a senior VP at Intel, we need “several orders of magnitude more powerful computing capability” to make it possible. 

It’s this demand for computing power, Tan says, that has spurred the “decentralization” of data center networks: tech companies are looking around at their existing infrastructure and saying, “Hey, we’re not able to give to people in Jakarta, or people in Manila, the same performance levels that people in Singapore [are] enjoying.”  

 “It’s almost like an accordion,” says Pat Lynch, who studies data centers for the commercial real estate research firm CBRE. Data centers are still being built in places like rural Oregon. But now they are “expanding out.” 

The way these new data centers blend into the urban and suburban landscape of office buildings or custom warehouses or industrial parks is a double-edged sword. The approach might make sense from a security standpoint. It also spares people from looking at the eyesore of vast halls crammed with computer servers.

The downside of this invisibility, though, is that we aren’t often forced to think about what all our internet use is costing us. Data centers account for 1.8% of all electricity use in the US and 0.5% of the country’s greenhouse-gas emissions, according to a report last year—far from a negligible amount. Some strategies could help, such as reusing the heat that they produce in copious quantities. But getting to that point would require stepping back from the rush to build and truly intertwining data centers—with all the heat they generate, the energy they consume—into our existing urban ecosystems.

Michael Waters is a writer based in New York.

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