Adair Park, a small parcel of land southwest of central Atlanta, has been a neighborhood on the rise in recent years. The site is part residential, part industrial and is adjacent to the local train station and the popular Beltline walking trail. Developers have moved in over the past few years, transforming those vacant lots and dilapidated buildings into new homes, co-working spaces and retail stores.

But now, in this stretch of land and in the southeast Atlanta metro area, demand for one type of real estate threatens to crowd out the construction of another type of real estate: data centers.

There are signs that data center facility space used to transmit, accelerate, display, calculate, and store data information on network infrastructure is currently in short supply. The race for artificial intelligence among the world's largest technology companies is driving a scramble for larger, more powerful computing facilities.

During this wave, Atlanta's data center construction is growing faster than almost any other large city.

According to data from real estate firm CBRE, data center construction in the Atlanta metropolitan area increased by 76% in the first half of 2024 compared with the same period a year earlier, measured by power capacity. Meta, Google, Microsoft and Musk's X Company all operate data centers in the Atlanta area or are planning to build new data centers. X also received $10 million in local tax credits for its expansion this year.

These companies, along with many other technology companies and real estate investors, were attracted by Atlanta's cheap electricity, state tax incentives and existing fiber optic infrastructure.

Even as real estate investors' overall enthusiasm for other types of real estate wanes during a period of high interest rates, demand for data center land is surging across the country.

According to GreenStreet, the total construction area of ​​data centers will grow at an average annual rate of 43% between 2023 and 2024. During this period, total area growth for multifamily, hotels, self-storage and other property types averaged less than 3%.


“The pace of growth we’ve seen over the past few years has really caught people off guard,” said David Guarino, a data real estate analyst at GreenStreet.

Analysts say devoting more space to computing and artificial intelligence is inevitable. As AI progresses from training models to what the industry calls logical "inference" (when AI actually starts working and becomes commercially viable), businesses will need more space and power than they do now. This will push more providers into places with the fastest internet connections, which tend to be major population centers.

Opposition under "Horse Racing Enclosure"

However, some Atlanta locals are fighting back in the face of this wave of data center land grabs.

A growing number of local residents and lawmakers are concerned that the pace of development of data centers and the amount of land and resources devoted to them has been too rapid. They say this has begun to compete with more pressing real estate needs such as housing and retail stores.

In September, the Atlanta City Council banned the opening of new data centers in communities near transportation hubs. This month, a decree allowing an exception to open a data center in Adair Park was revoked.

Atlanta Mayor Andre Dickens wrote in a letter regarding the legislation that "data center development cannot be prioritized over people-centered urban development, including providing affordable housing, high-quality jobs and community retail."

Builders in other U.S. cities and states, which are also churning out new data center facilities, may follow Atlanta's lead and impose new restrictions on data centers. Fairfax County in northern Virginia recently banned new data centers within one mile of a railroad station.

Nonetheless, this may not significantly hinder the development of new data center construction in the local area, as most of the new data center facilities are located in suburban areas. Data center facilities in metro Atlanta will have more than 4,000 megawatts of power load by 2028, roughly 30 times the area's data center load in 2012, according to real estate data firm GreenStreet.


Interestingly, the expansion of data centers has also brought blessings to some office building owners, who have disposed of previously vacant floors by renting to these companies.

But Atlanta lawmakers also say rapid growth comes at a cost. Residents share the same concerns, with the metro Atlanta housing shortage totaling about 100,000 units by 2022, according to one estimate.

Matthew Garbett, a member of the Adair Park Neighborhood Association and co-founder of the urban planning advocacy group ThreadATL, said, "I think the city government has realized that data centers, while providing some value to abandoned office buildings, do not really add to the vitality or housing of the city in the long term."

The data center industry is also still looking for new markets that will welcome them. Amazon Web Services said earlier this year it would invest $10 billion to build a new data center near Jackson, Mississippi, and Microsoft recently announced plans to build three new data centers near New Albany, Ohio.

Most U.S. states still offer some form of incentives for data centers, according to the Data Center Coalition, an industry trade group. For example, Georgia offers sales tax incentives for equipment purchases that can cost hundreds of millions of dollars for a single site. Backers of data centers say property and other tax revenues generated by data centers more than make up for the loss in sales tax breaks.