In the digital age, data has become the most valuable asset, driving the global economy and reshaping industries. As a result, data centers—specialized facilities that house the infrastructure powering cloud computing, artificial intelligence (AI), high-performance computing (HPC) and digital transactions—have emerged as the newest premium real estate. No longer confined to the realm of tech giants, data centers are now a lucrative investment class, sought after by real estate developers, institutional investors, and governments alike. With skyrocketing demand for data storage, low-latency connectivity, and sustainable power solutions, these facilities are transforming from mere server warehouses into high-value, strategically located assets that fuel the future of the digital world.

As businesses enter the market to build private data centers for their AI and HPC needs, one of the most important factors to consider is where their data center should be located. In this article we look at primary considerations when choosing a location and provide some insights about where new data center hubs are likely to arise.

Top Factors For Data Center Locations

1. Power infrastructure
2. Network connectivity
3. City Zoning and Permits
4. Proximity to end users
5. Land availability and affordability
6. Environmental Requirements

Power Infrastructure

As AI models become increasingly complex, the newest generation of high performance computing infrastructure needs more power, more cooling, bigger networks and bigger storage. This kind of data processing consumes significantly more power than ever before, putting pressure on a region’s power infrastructure, and the utility’s capacity to expand the power grid quickly. Therefore, the best location for new data centers is typically in areas where a reliable utility power transmission infrastructure is built out, and where additional capacity is readily available for future expansion.

Even with well-built power infrastructure, the pressure this puts on the electrical grid is immense. This has led to long delays for those wanting to get access to large power in certain regions. For example, Ireland’s transmission system operator has stopped issuing new grid connections to data centers in the Dublin area until 2028^[1].

Network Connectivity

Having a choice of Internet service providers offering high bandwidth and access to fiber optic infrastructure is a consideration. In general, datacenter owners should look at locations where they can accept redundant connections from more than one provider, and where they can be interconnected with a major POP for their providers. Having a choice of providers with advanced networking capabilities will also allow high speed interconnection with private corporate networks which may be required to access certain corporate data warehouses which will be the source for much of the AI processing that will be needed.

City Zoning and Permits

Building a data center in populated areas requires several permits to comply with zoning, environmental, safety, and construction regulations. Most areas are not designated for data center use by default, and negotiations with city officials to request rezoning, or special exemptions is needed. In some cases, a CUP (Conditional Use Permit) is required. By using MDCs (Mobile Data Centers), some of these restrictions may be easier to meet. This includes noise levels, air and water discharge permits for cooling systems, and permits to install generators.

Proximity to End Users

While AI used for training doesn’t require low-latency, AI used for real-time analysis and decision-making needs high bandwidth with low latency and is, ideally, close to where the users of the data processing are located. This may mean close to high density populations, data sources or IoT devices. As we mention in our article on Mobile Edge Computing, having data travel long distances can result in a poor user experience. And, if your business is processing sensitive information in real-time, keeping the data in a limited geographical area reduces the attack surface by lowering the number of other networks that data must transit through to get to or from its intended source or destination. This may also be required as part of regional data sovereignty laws that may require keeping the data within a specific geography for regulatory compliance. .

Land Availability and Affordability

Land availability can become an issue if communities and government regulations are not aligned with high-performance computing needs. In the United States, Virginia has been an ideal location and now has over 300 data centers making it the largest data center market in the world. The majority of data centers are in Northern Virginia and earning it the moniker “data center capital of the world”. Local governments are under pressure to balance the revenue they enjoy from the data center industry with residential constituent backlash. Other governments, nationally or internationally may offer incentives, making it a more affordable location.

While land may be available, factors such as climate, earthquakes and other natural disasters and whether the data center can scale in capacity have to be considered.

Environmental Requirements

Since many municipalities and regions have been looking to reduce their impact on the environment, it’s not uncommon to require an EIA (Environmental Impact Assessment). This evaluates the effects of the new data center on local ecosystems, water usage, and carbon footprint. This may also include an assessment of a disaster recovery plan which handles scenarios related to hazardous materials in use at the site, for example battery waste and chemical leaks, coolant and refrigerant leaks, improperly stored diesel fuel and transformers containing PCBs. Fire suppression systems may also contain compounds which can be harmful if leaked. Proper management, regulatory compliance, and the adoption of greener technologies (e.g., renewable energy, liquid cooling, and battery recycling) can help mitigate these environmental risks. Choosing vendors with self-contained solutions that have already been vetted for environmental impact may significantly ease the compliance process.

A Global Look at Data Center Locations Today and in the Future

United States

Because of the factors mentioned above, new data centers are likely to be located in secondary markets, where high-performance computing demand is rising, and emerging markets, where power is still abundant. McKinsey & Company provides insight into likely U.S. locations in Exhibit 1.

Exhibit 1. Data center presence in the U.S.

Europe

Despite increasing energy and sustainability regulations, the data center market is booming. Current markets include Frankfurt, London, Amsterdam, Paris and Dublin. However, secondary markets are on the rise and include Madrid with supportive government policies, and Berlin, with its central geographical location and lower real estate costs and tax incentives. Poland, Austria and Czech Republic are becoming viable alternatives due to land availability for expansion and cost effectiveness.

Exhibit 2. Data center presence in Europe.

Middle East/Africa

In addition to AI leading data center growth, the MEA region is leading in smart city development aiming to enhance urban living conditions by improving infrastructure, transportation, sustainability, and public services. The region is also utilizing solar energy and other sources of renewable energy to support the power grid. The challenge for the region lies in a lack of skilled workers.

Exhibit 3. Middle East/Africa Data Centers

Asia Pacific

While Singapore remains a tech friendly business center, power restraints and government restrictions have limited data center growth. Nearby countries offer lower land prices, taxes and power costs. Meanwhile Japan is welcoming data centers as part of its “digital garden city nation”, land availability remains an issue for scalability concerns. Whereas in Australia, land is not a concern, but power accessibility remains questionable.

Exhibit 4. Data Centers in Asia Pacific.  CBRE: Global Data Center Trends 2024.

ECOBLOX can help your business sort out the right location for your data center needs. Our Modular Data Center (MDC) solution technology not only lessens the land requirement and scalability issues that traditional data centers have, but they can be operational in a few months not years at 2.5 times less financial investment and lower cost. Modular data centers can be close to where your users are and, in most cases, consume 25% less energy and have 35% more IT rack space. While every business has unique needs and concerns, ECOBLOX can partner with you to design, plan, and build a data center that fits your business.

^[1] McKinsey & Company, October 2024 and Ireland capacity outlook 2022-2031, EirGrid and SONI, October 2022 .