Dallas-Fort Worth sees surge in data center construction amid rising demand

Dallas-Fort Worth Sees Surge in Data Center Construction Amid Rising Demand

The Dallas-Fort Worth region is experiencing unprecedented growth in data center construction, driven by the burgeoning demand for data processing capabilities spurred by advancements like 5G, artificial intelligence, and cloud computing. This surge is reflective of a broader trend across the United States, where the need for more data centers is escalating. The construction of these facilities, which house crucial IT infrastructure such as servers, routers, and applications, responds to the intensifying requirements of a data-driven world.

Phoebe Bernet, an associate at the real estate firm CBRE, articulates the situation succinctly: “Demand is crazy everywhere,” she said. Yet this demand is particularly pronounced in Dallas-Fort Worth, which trails only Northern Virginia in data center growth. The area’s attributes, such as ample flat land and the promise of sufficient power, make it an attractive site for developers and hyperscale data center operators.

According to CBRE’s latest North American Data Center Trend Report, data center space under construction in Dallas-Fort Worth reached a record 472.1 megawatts in the first half of 2024, marking a nearly 73% annual increase. An extraordinary 94.5% of the under-construction space has already been leased, indicating limited flexibility in the market as overall vacancy rates contract to 4.4%.

Chris Herrmann, senior vice president with CBRE’s Data Center Solutions group, highlighted the extraordinary level of activity: “Never in the history of our industry have we seen a greater number of hyperscalers and colocation operators scour the DFW market sites for the next wave of data center development.”

While the boom benefits the local economy by contributing to the tax base, it also places significant strain on regional resources. Mohammad Atiqul Islam, an assistant professor in the computer science and engineering department at the University of Texas at Arlington, noted that the local power grid is already stretched thin due to the growing population and expanding business base.

Concerns from residents in areas near proposed data centers underscore the tension. For instance, individuals from the Panther Heights neighbourhood in southwest Fort Worth recently voiced objections during a hearing for a planned data center on 121 acres of land. Their worries included potential issues such as increased traffic, light pollution, energy consumption, water usage, and noise. Despite the residents’ reservations, the Fort Worth City Council approved the zoning change on September 17, pending developer submission of a site plan.

Council member Jared Williams, representative for District 6 where the project is located, emphasised the project’s economic potential, estimating a future taxable value of $750 million. This significant valuation underscores why municipalities find data centers appealing despite their modest direct employment impact. As UTA’s Islam explained, these centres contribute notably to local government finances through substantial business property taxes and frequent equipment upgrades.

Curt Holcomb, executive vice president at JLL, pointed out the substantial costs and economic impact of constructing data centers, noting that a typical facility could cost up to $200 million. The high-technology equipment inside, potentially valued in the billions, further adds to the tax contributions over the operation’s lifespan.

To address the strain on local resources, data center companies are exploring alternative power sources, including nuclear, natural gas, and hydrogen. For instance, Amazon Web Services has acquired a data center campus in Pennsylvania powered by nuclear energy, enabling access to carbon-free energy while preserving grid capacity for other users. Fort Worth, with its abundant natural gas supply, is also poised to become an attractive location for data center operators seeking to generate electricity onsite through natural gas turbines.

Furthermore, data centers’ flexible operational needs allow companies to redirect their activities to other locations if local resources dwindle, easing potential strains.

Distinct from traditional data centers, crypto or Bitcoin mining centres operate with different requirements and impacts. While traditional centres demand high uptime and built-in redundancy, crypto mining centres can afford periodic shutdowns and typically require only power and internet connectivity, allowing for more remote placements.

As the second-largest data centre market in the US, Dallas-Fort Worth’s growth exemplifies the balancing act between economic benefits and resource management. Northern Virginia remains the largest market, followed by Dallas-Fort Worth at 591 megawatts, with Chicago, Phoenix, and Silicon Valley trailing.

The ongoing expansion of data centres reflects the rapid pace of technological advancement and poses complex logistical challenges for urban planning, resource management, and community engagement.

Source: Noah Wire Services