Data centers are the critical infrastructure underpinning the digital age, and even a brief outage can have massive ripple effects. That’s why their developers have historically avoided disaster-prone cities like Houston and Miami.
But with an estimated $7T in data center construction needed by 2030 to keep pace with computing demand and a shortage of available power in major hubs — plus a growing need for data centers to be located near population centers — that is starting to change.
Bisnow/created with assistance from ChatGPT
Houston had 57 megawatts of data centers under construction during the first half of this year, triple what was being built just six months prior, according to JLL’s midyear data center report. That would increase the region’s existing data center capacity by nearly 40%.
In Miami, there were no data centers under construction last year, but that changed in March when information services giant Iron Mountain broke ground on MIA-1, its first Miami data center, with 16 MW of capacity.
The projects are coming despite a projected 256% increase in damage risk to data center infrastructure from climate change by 2100, according to an analysis of 8,868 data centers by Cross Dependency Initiative.
“As climate change becomes real and more port entry, urbanized campuses become reality, climate change increasingly threatens the external systems and the government functions that data centers rely on,” said Adrian Conforti, a senior managing director overseeing data center development for Cushman & Wakefield.
The rise in generative artificial intelligence and expected larger-than-ever demand for inference, or “last-mile,” data centers mean more will have to be built near all major population centers, no matter the risk.
“What if no roads are built somewhere?” said Josh Forman, a Miami-based digital infrastructure attorney with Greenberg Traurig. “That’s what this is. At its core, it’s the infrastructure that’s underpinning the digital ecosystem.”
Another 24 MW data center broke ground in Houston last month, and insiders say Houston’s data center market is primed for even more growth due to access to alternative power sources, a deregulated energy market and a strong population center.
But climate change keeps driving up temperatures and increasing the intensity and frequency of damaging natural disasters. There was a 180% increase in the number of billion-dollar weather events from 2013 to 2023.
This forces developers to pragmatically consider climate risks during construction and development, which can add 15% to 20% to the cost, Conforti said.
Building For Resilience
The threat of hurricanes has been the main factor holding back Houston from becoming more of a data center hub, said Allan Schurr, chief commercial officer for Enchanted Rock, an alternative energy and power generation provider.
The largest data center market in the country is Northern Virginia, with 5,574 MW of inventory and 1,067 MW under construction.
“Northern Virginia is huge for the data center market, and they just have less risk of catastrophic events,” said Greg Sherman, director of engineering for Houston at architecture firm HOK.
The fastest-growing market is Atlanta, which has 1,072 MW of inventory and 1,112 MW under construction. Dallas-Fort Worth closely follows with 1,539 MW of inventory and 1,083 MW under construction.
Like Atlanta and Virginia, DFW benefits from significant distance from the Gulf Coast, but it is experiencing power constraints that are pushing developers toward Houston, JLL researchers said.
“Building techniques today can completely protect those kinds of operators from the risks that would historically have caused them to go elsewhere,” Schurr said.
Utility infrastructure and regulatory approval are the main obstacles to data center development, Conforti said. Houston’s unique combination of advantages positions it to capture a substantial data center market share, he said.
One of the developers taking a chance on building digital infrastructure in Houston is VivaVerse Solutions, which is developing a $2B project with a 774K SF data center at the former Compaq Computer campus northwest of Houston. The project, known as Viva Center, is transforming the campus into a facility specifically for AI and high-performance-computing workloads, VivaVerse President Freddy Vaca said.
In general, building in the Houston area requires extra consideration of environmental elements.
“A lot more engineering goes into it,” Vaca said.
Because Compaq built the campus in the 1980s to be self-sustaining with its own power and water sources, as well as large-weight-bearing floors, it lends itself to a resilient upgrade, Vaca said.
The campus flooded multiple times, including during Hurricane Harvey in 2017, so the developers are engineering flood mitigation on top of Harris County’s efforts. Viva Center will put mission-critical infrastructure on 10-foot raised platforms and fortify buildings with 6-foot concrete flood walls, Vaca said.
Sherman said HOK often integrates elevation and power redundancy into designs for mission-critical facilities.
The engineers use concrete pad elevation for smaller buildings in flood plains. They also regrade around larger-scale buildings, redirecting the water to lessen the flood risk for the facility and require less elevation.
Power redundancy typically comes with two underground power lines connected to different substations, in case one fails.
“You don’t want to take them overhead,” Sherman said. “Because whenever that derecho came through my neighborhood last year, all the overhead power lines got knocked down.”
Demand In High-Risk Markets
Data center development is exploding due to a rise in generative AI, requiring hyperscale AI training centers like the $500B Stargate development from ChatGPT creator OpenAI.
Along with massive AI training centers, there will be increased demand for inference data centers to be deployed in smaller facilities near major metro areas or specific end users.
Latency, or the amount of time it takes data to travel from a data center to an end user, is critical for inference use cases like an AI model detecting fraud for a financial firm. Instant detection requires computing near where most of the transactions happen, meaning fast-growing states and metros like Floridaand Houston will be target markets.
Generative AI is driving a 165% increase in power demand from data centers by 2030. This puts power availability at the top of the list for data center site selection.
“Everyone is looking for power anywhere,” Schurr said.
Houston benefits from being part of the state’s deregulated electricity market, and its utility provider, CenterPoint Energy, plans to invest $53B into energy infrastructure and resilience over the next decade.
Houston also benefits from having a significant number of natural gas pipelines and alternative energy companies, like solar and wind, opening up options for data center operators.
“It’s a perfect place for entrepreneurialism of this type, where the technology is just changing all the time,” Vaca said.
Houston may eventually attract some hyperscale data centers due to its planned electricity infrastructure improvements, but it will capture a share of inference data centers due to its large population, Schurr said.
The same will be true in Miami, where the cost to transport data from areas like Texas or Atlanta is prohibitive.
“If AI continues to take off like people are saying, there will be smaller inference data centers here in Miami,” Greenberg Traurig’s Forman said. “There have to be, whether it’s retrofitting the current ones or finding ways to build new ones.”
But without meaningful mitigation, the most resilient data center could face catastrophic failure, Conforti said.
“Even if a facility is designed to withstand flood and storm conditions, if the grid fails or the generators cut off or the staff cannot access the site, you have a major emergency power problem,” he said.
Climate change will continue to warm temperatures and intensify weather patterns. Coastal sea levels will rise about a foot, and flood risk could increase 26% by 2050.
“So that becomes a bigger consideration 15, 20, 25 years down the road,” Conforti said.
