Southern California is increasingly becoming a hotspot for data center construction, with the growing need for cloud computing, AI-driven data processing, and the expansion of online platforms. This surge in demand for data storage is reshaping the commercial real estate landscape, bringing both opportunities and challenges to the region. The demand for data centers—facilities used to house servers, data storage, and related computing infrastructure—has grown exponentially, spurred on by the rise of industries such as e-commerce, streaming services, social media, and financial technology.
The Growth of Data Centers in Southern California
The increase in online activity, driven by the global shift toward digital services, has accelerated the demand for data storage capacity. As companies and consumers continue to move more of their lives into the digital sphere, including increased video streaming, cloud-based services, and AI applications, the need for data centers has never been greater. The state of California, particularly Southern California, has long been a key player in this growth due to its strategic location, established infrastructure, and business-friendly environment.
By 2025, Southern California has accounted for over 20% of the nation’s data center market activity, with Los Angeles, San Diego, and Irvine emerging as key hubs for data center construction. According to a recent report from CBRE, over 6 million square feet of new data center space was leased in 2024 alone across the region. The report attributes this growth to the increasing shift towards cloud computing, AI-powered services, and digital platforms requiring vast computing resources.
Environmental Concerns and Mitigation
However, while data centers are essential for supporting the digital economy, they come with significant environmental impacts. One of the primary concerns is the enormous energy consumption required to power the servers and cooling systems of data centers. These facilities require vast amounts of electricity, especially for high-performance computing needs that are critical for cloud services, machine learning models, and financial algorithms. As California’s energy grid faces increasing strain due to rising demand and the challenge of meeting sustainability targets, many are questioning whether this growth in the data center market is sustainable.
To address these concerns, many developers and operators are working to integrate green technologies and reduce the environmental footprint of their operations. Companies like Equinix and CyrusOne, which are building massive data centers in Southern California, are incorporating renewable energy sources such as solar and wind power to offset their carbon emissions. In 2025, Equinix announced its commitment to running all its Southern California data centers on 100% renewable energy. Furthermore, the company is using advanced cooling solutions, including liquid cooling technologies, to minimize energy use while ensuring the servers remain at optimal operating temperatures.
Workforce and Economic Impact
In addition to the environmental considerations, the data center boom in Southern California is having a significant economic impact. The construction of these facilities is creating thousands of jobs, including positions in construction, engineering, data management, and cybersecurity. The growth of data centers has also brought increased demand for skilled workers in fields such as networking, cloud infrastructure, and security, making Southern California a hub for tech talent.
The rise of the data center market is contributing to the broader commercial real estate sector by transforming industrial spaces into high-tech facilities capable of supporting digital infrastructure. As a result, commercial developers and real estate agents are increasingly looking at industrial zones and repurposed warehouses as prime locations for data centers.
Moreover, data centers are not only bringing jobs to the region but also driving additional investment in infrastructure, including upgrades to local electricity grids, broadband networks, and transportation systems. With demand for digital services increasing, Southern California’s data center market is expected to continue to thrive, providing new opportunities for both commercial real estate developers and local governments.
The Future of Southern California’s Data Center Market
Looking ahead, Southern California’s data center market is expected to maintain its rapid growth trajectory. By 2030, the demand for data center space in the region is projected to increase by 30%, driven by further advancements in artificial intelligence, 5G networks, and the ongoing digital transformation of the economy. The state’s policies, such as tax incentives for green energy use and support for AI and cloud computing infrastructure, will continue to drive investment into data centers.
However, challenges remain. As demand for data center space continues to rise, balancing technological growth with sustainable development will be critical. California will need to ensure that its data center industry meets its energy efficiency and sustainability goals while accommodating the increased digital demand. The region’s ability to lead the way in green data center innovation could position it as a model for other parts of the world facing similar growth in the digital infrastructure sector.
As businesses, consumers, and governments continue to rely more heavily on cloud services and big data applications, the importance of data centers will only grow. Southern California’s commercial real estate market will continue to evolve as more of these facilities are built, reshaping the landscape of the digital economy.
