Energy-hungry data centers are quietly moving into cities

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When you think of data centers, you probably picture a massive server farm in a rural area where electricity is cheap and tax breaks abound. Big tech companies like Google, Amazon Web Services, Microsoft and Meta have built millions of square feet worth of server space in places like Northern Virginia or Hillsboro, Oregon. However, in order to reduce delay times, companies are now increasingly weaving nodes in their network into the fabric of cities. For example, the One Wilshire building in Los Angeles, which used to house a network of law firms, now monitors a third of all Internet traffic between the US and Asia.

To the uninitiated, these urban physical internet hubs probably don’t look like much at all. And that’s intentional. Equinix, the largest owner of colocation data centers with 10.9% of the global market, operates data centers that are generally not meant to be conspicuous. In Dallas, the company owns a sprawling industrial building just outside of downtown that doubles as a data center hub and the headquarters of a for-profit college. In Tokyo, most of its operations take place on different floors within the city’s sea of ​​skyscrapers, “so you wouldn’t even notice it’s there,” says Jim Poole, the company’s vice president of business development. In Sydney, Australia, Equinix is ​​building a new data center in an expressionist style not dissimilar to that of the city’s famous Opera House. And around one of its Amsterdam facilities, Equinix dug a moat — less for security reasons, Poole says, than to blend the building into its surroundings, given that Amsterdam is a city of canals. “Most of the time, people are actually trying to make their buildings fit the environment,” he says, adding that local regulators sometimes even require it.

Demand for such facilities, especially in metropolitan areas, is growing rapidly: last year, colocation data center spending increased by 11.7%. The biggest cloud companies are not far behind. Amazon Web Services has pushed shrunken data centers it calls Local Zones near larger population areas; So far they have been placed in 32 cities across the US. The trend has even sparked interest from Walmart, which may soon begin renting out portions of its superstores to host data centers for third-party companies.

One explanation for the high demand, Poole says, is that consumers themselves have changed. As more of our lives have gone online, “people’s tolerance for latency has continued to drop,” he says. The main drivers are those applications where a millisecond delay can prove critical: you might not notice a quarter-second delay on Netflix, but you certainly will if you use an online sports betting app, trade stocks or participate in a multiplayer game like Fortnite.

For example, companies like Google, Amazon and Microsoft are embracing cloud gaming, where games are streamed over the internet without a console or phone providing processing power. But many popular games, like first-person shooters, “require very fast response times and therefore really fast connectivity,” says Jabez Tan, research director at Structure Research. And such games don’t work on a streaming service without the help of a large number of data centers.

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