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Cheap Power, High Demand Drive Texas Data Center Growth

North Texas is now ranked second in U.S. markets by its inventory of data centers, according to commercial real estate services firm CBRE. Online lifestyles and the growth of AI and cloud-based tech are partly responsible for the demand.

An abstract view of a data center with motion blur and light trails.
(TNS) — Tucked into the suburbs around Texas’ biggest cities, massive windowless buildings are rapidly popping up across hundreds of acres.

Looking more like warehouses than anything to do with technology, they house servers and other equipment needed to stream videos and music, buy and sell items on Amazon, bank online and post on social media.

Demand for the power-hungry data centers is soaring largely because of the growth of artificial intelligence and other cloud-based technologies that are key to Americans’ online lifestyle.

“It’s just this crazy amount of demand,” said Brant Bernet, senior vice president with CBRE Group Inc.’s Data Solutions group.

But while the South Texas area, including San Antonio, has seen steady growth in its inventory of data centers, it’s far outstripped by the explosive growth in the Dallas-Fort Worth area, which has become a national data powerhouse.

North Texas now ranks second among U.S. markets by inventory of data centers, according to commercial real estate services firm CBRE, with a 173.1 percent increase in the second half of 2023, which pushed its total to 565.3 megawatts. That put it behind northern Virginia — the world’s data center capital — but ahead of Silicon Valley, Chicago and Phoenix.

Among secondary markets, the Austin-San Antonio area came in second with 162.2 megawatts, up 7.5 percent from the second half of 2022. It lags central Washington but has more inventory than Southern California, Seattle and Houston, the latter of which ranked fifth with 134.1 megawatts.

The vacancy rate was 7.4 percent in Dallas-Fort Worth, 1.8 percent in Austin- San Antonio and 19.7 percent in Houston in the last six months of 2023, an indication that most of what’s being built is already leased and any pockets of space that open up are quickly being taken.


Texas is attractive because the cost of power here is relatively low compared with other parts of the country — a huge incentive because data centers are such power hogs — and it’s easy to get to from both coasts, Bernet said.

Weather, topography and proximity to airports, dams and water towers are other factors. The likelihood of hurricanes, ice storms and other natural disasters is fairly slim in San Antonio, Dallas and Austin. Houston sees more hazardous weather from hurricanes, but some companies headquartered there want to be near their facilities.

There’s also ample land, which is increasingly important as companies build larger centers, but whether that acreage has power infrastructure is key.

“It’s not the availability of land but availability of land that has the power and can get the power in a timely manner,” said Chris Herrmann, senior vice president with CBRE’s Data Solutions group. “In the Austin and San Antonio markets, in the D-FW market, there are large chunks that a lot of developers and operators are looking at. They can be had — the land is there. But the question is, how quickly can power be delivered? That’s really the name of the game right now.”

That’s put pressure on utilities. CPS Energy is gearing up for a tenfold increase in demand from data centers that are expected to consume more than 3,300 megawatts by 2033 — enough to power more than 650,000 homes.


Texas regulations allow transmission lines needed to carry power to the centers to be built faster than in many other states — another reason for their proliferation — but they still can’t be installed as quickly as companies want, CPS Energy President and CEO Rudy Garza told the utility’s trustees late last year.

Locally, a cluster of facilities have been built in far west Bexar County for companies and government agencies such as Microsoft Corp., Valero Energy Corp., Frost Bank, Christus Health, Lowe’s, Amazon and the National Security Agency. Affiliates of CloudHQ and Vantage Data Systems, companies that build large hyperscale data centers, bought land there last year.

Some of those companies received tax abatements and grants years ago to build the centers, a practice the city has since stopped. CPS executives said they are trying to point companies away from that area and toward east and southeast parts of the county to spread out the power loads and prevent congestion.

In the Austin area, companies such as Skybox Datacenters, Switch and Sabey Data Centers have built and expanded data centers. Prime Data Centers LLC plans to build a data center on about 206 acres near San Marcos. The company is slated to get property tax perks from Caldwell County worth $840,000 for the first phase of the project, which is expected to cost $1.3 billion.

The distribution of power infrastructure and how quickly it can be built will shape where new data centers go, Bernet and Herrmann said.

“The corridors between Dallas and Austin, and between Austin and San Antonio, and between all of those and Houston are poised for really big data center growth over the next 10 years,” Bernet said.

©2024 the San Antonio Express-News, Distributed by Tribune Content Agency, LLC.