The backbone of the internet and brains behind artificial intelligence may seem like nebulous concepts hard to visualize in the real world.
But in the Atlanta area, they’re easy to see. You just have to look at construction sites.
By midyear, data center construction had increased 76% in the Atlanta market compared to the same time last year, the most among any of its peers, data from real estate services firm CBRE showed.
The most common way to measure the size of a data center is by the power it consumes. And right now, there is more leasable data center space under construction as measured by power demand than there is total leasable data center space in metro Atlanta currently in use — the only major market in the country with such high demand, CBRE says.
If all of those data centers entered service today, Atlanta would be the second-largest market in the country.
“For the next three years, (the Atlanta market) is going to be a very active data center construction site,” said Raul Martynek, CEO of data center developer DataBank, which has five campuses in the Atlanta area.
While other commercial real estate sectors have struggled to find financing, data centers — filled with rows of computer equipment that power the internet, cloud services and the AI movement ― have emerged as a darling for institutional investors and tech funds.
Developers tout the promises of high-paying tech jobs and property tax dollars to local governments and schools, but the state and many city and county development authorities dangle huge incentives to land the campuses, some of them the size of regional malls.
These centers require huge amounts of electricity and water to cool them, take up large swaths of land and create only a few dozen permanent jobs.
Customers of utilities, such as Georgia Power, soon could see the impact of the flock of data centers in their monthly power bills. Earlier this year, regulators green-lit an expansion of Georgia Power’s generation fleet, which leans heavily on burning fossil fuels, mainly to serve data centers the company expects to come to the state.
The sheer amount of data center space poised to join Georgia has become a point of contention for utilities, regulators and the communities targeted for these facilities. Allan Schurr, the chief commercial officer for Texas-based microgrid company Enchanted Rock, said data centers haven’t just become more common — they’re getting exponentially larger and more power-hungry.
“Data centers have gotten really big very quickly. Just a couple of years ago, a big data center might have been a 50- or 60-megawatt data center,” he said, referencing the power demand. “Now, they’re 10 times that, and the impact on the grid goes up exponentially when you start making these data centers so large. The grid just can’t absorb them like it did before.”
Since 2020, Atlanta’s data center market has grown at the third-fastest rate in the country, trailing Hillsboro, Oregon, a Portland suburb, and Phoenix.
The largest campuses, called hyperscalers, are built across several phases and can represent 10-figure investments. Edged Energy recently had a ribbon-cutting ceremony for its first building within a $1.7 billion-campus at the former Tilford Yard in Atlanta, and DataBank is currently expanding its Lithia Springs campus called AT5.
Credit: Courtesy DataBank
Credit: Courtesy DataBank
Thursday, a state infrastructure analysis request was filed in Coweta County for a 2.1 million-square-foot data center campus — larger than the Mall of Georgia.
Mike Lash, first vice president of CBRE’s data center solution team in Atlanta, said the industry flocks to areas with cheap and reliable access to power. He said Georgia and its utilities have done a good job catering to the industry’s needs through long-term power generation planning.
“We kind of have the sandbags out there ready to go for this tsunami,” Lash said.
‘We talk in billions’
Some companies own and operate their own data centers. Then there are speculators who develop them and lease storage space to other companies.
Just like a cellphone has limited storage space, data centers quickly can reach their capacity. Only about 1% of metro Atlanta’s existing data center space was vacant at the end of June, said real estate services firm Cushman & Wakefield. That figure was more than 9% in early 2020.
Credit: Courtesy Cushman & Wakefield
Credit: Courtesy Cushman & Wakefield
The wider industrial market — which includes logistics centers and other warehouses — had nearly 8% of its space vacant at the end of June; the metro’s embattled office market is roughly a quarter vacant.
Yih-Khai Wong, principal analyst with ABI Research, said data centers are in such high demand because companies’ digital footprints continue to expand. The fast-developing AI industry is especially in need of more digital storage space.
“We expect the proliferation of AI, especially generative AI solutions, to play a big part in the demand for data center infrastructure, particularly from the major cloud hyperscalers,” Wong said in an email.
Lash with CBRE called data centers a core piece of “the future of our infrastructure in the United States.”
“These are long-term plays,” he said. “You’re going to see a lot of money pour into that.”
Cash has been pouring into the data center sector like a faucet. EdgeConneX recently paid more than $318 million to buy 63 acres in Union City — more than $5 million an acre — to develop a $1.8 billion data center campus for tech giant Microsoft. Buckhead-based data center developer T5 last month announced a 300-megawatt data center campus in Palmetto, its fourth in the Atlanta area.
Credit: Courtesy T5
Credit: Courtesy T5
Pete Marin, T5′s CEO, said the industry is unique because projects contain such expensive equipment, which requires large amount of investor backing. “There’s not many industries that are similar to us that consume so much capital,” he said. “We talk in billions of dollars in this business.”
Soaring demand coupled with concerns about the industry’s proliferation prompted state lawmakers to pass legislation to suspend a statewide equipment sales tax break for new hyperscale data centers. But after hefty lobbying from the industry, Gov. Brian Kemp vetoed the bill in May, saying it would be abrupt and could undermine investment.
Marin, who was among those urging Kemp to veto the bill, said Georgia’s tax break program evens the playing field with other states that have similar incentives. But Brionte McCorkle, executive director of advocacy group Georgia Conservation Voters, argued the suspension would have given Georgia and its utilities time to better evaluate the coming surge of data centers.
“They’re coming, and we had an opportunity to slow it down and take a more rational and thoughtful approach,” she said. “And instead the governor vetoed that.”
Profit and power
Georgia Power, the state’s largest electric utility, continues to see its pipeline of committed “large load” projects expand, company spokesman John Kraft said.
Georgia Power repeatedly has said it expects serving those customers will drive down rates for everyone else, but critics say there’s no guarantee those savings will materialize.
In October, the company said it had commitments from large load customers who would need 3,600 megawatts of electricity by the early 2030s. When it provided the PSC with an update in August, Georgia Power said that number already had doubled, to around 7,300 MW.
Based on the company’s disclosure, more than 90% of its projected large load growth comes from data centers, 10 of which have already broken ground. That includes one facility whose estimated electricity demand is more than 1,400 MW. That’s more than the entire output of one of Plant Vogtle’s two new nuclear reactors, each of which can produce enough electricity to power about 500,000 homes. The names and locations of individual data centers are redacted from the company’s filing.
Bob Sherrier, an attorney at the Southern Environmental Law Center, said it’s hard to say how long the data center boom will last, but argued “real caution” is needed before infrastructure investments are authorized to support the company’s growth forecasts.
Georgia Power’s customers already have faced a cascade of rate increases since early 2023 to pay for cost overruns on the Plant Vogtle expansion, transmission upgrades the company argued it needed and billions in outstanding fuel costs. The increases mean a typical residential customer using 1,000 kilowatt-hours of electricity a month will be paying $45 more for their monthly power bills by early next year, one analysis by the SELC said.
Any new power plants or high-voltage power lines could fall on customers to pay for, if they’re approved by regulators at the PSC.
“If we overbuild expecting more data centers to show up than actually do, we (ratepayers) still have to pay for them,” Sherrier said.
Credit: arvin.temkar@ajc.com
Credit: arvin.temkar@ajc.com
Sherrier also said Georgia Power’s strategy for meeting the supposed wave of electricity demand has been “hard to swallow.” A plan approved earlier this year by the PSC for serving the added electricity load the company expects includes some battery storage but leans heavily on planet-warming fossil fuels, including the construction of three new oil- and gas-burning units in Coweta County.
Kraft said those additions are part of the company’s plan to “responsibly transition our generation fleet to cleaner resources.” Sherrier, meanwhile, said he thinks the push to build more power plants to serve data centers is more about boosting Georgia Power’s bottom line.
“Georgia Power earns its parent, Southern Company, more profit when it builds capital-intensive projects,” Sherrier said.
Lash, the CBRE executive, said access to reliable and cheap electricity is the lifeblood of the data center industry and will continue to keep Georgia in the spotlight — for as long as the Peach State has ample juice.
“Follow the power,” he said.
