In the heart of Atlanta’s rapidly growing neighborhoods, a new kind of development is rising—one that promises a different kind of future for the city’s real estate market. Data centers, the massive, power-hungry facilities that store and process the digital information we all use, are booming. Yet, their meteoric rise is starting to stir controversy, as the city grapples with balancing technological growth and the growing need for affordable housing.
The AI race is driving the need for more data centers than ever before. With artificial intelligence advancing from training models to real-world application—what’s known as "inference"—tech companies are scrambling to build facilities that can power these demands. The result has been an unprecedented rush to secure land for new data centers, particularly in cities like Atlanta, which offers affordable electricity, favorable tax incentives, and robust fiber-optic infrastructure.
In the first half of 2024 alone, Atlanta saw a staggering 76% increase in its data center power capacity, compared to the same period the previous year. Companies like Meta, Google, Microsoft, and X (formerly Twitter) have made their mark in the city’s suburbs or are expanding existing facilities. The appeal is clear: the city offers a combination of inexpensive energy and significant tax breaks, not to mention its strategic location in the southeastern U.S. Yet, this seemingly unbridled expansion is causing tensions within the community, as residents and lawmakers fear the city’s resources—both land and power—are being consumed by an industry that provides few long-term local jobs.
The Dilemma: Growth vs. Housing
While data centers certainly bring investment, the massive scale of their construction comes with a price. Critics argue that the land devoted to these facilities could be better used for housing, especially given the severe housing shortage in the Atlanta metro area, which is estimated to be as high as 100,000 units. In response to mounting concerns, Atlanta lawmakers are beginning to act. In September 2024, the city council passed a ban on new data centers in neighborhoods close to transit and the Beltline—Atlanta’s popular redevelopment project that combines parks, transit, and commercial spaces.
Mayor Andre Dickens expressed his frustration with the unbalanced development, writing that “Data Center development cannot be prioritized over people-centered urban development, including affordable housing, quality jobs, and neighborhood retail.” For city officials, the rise of data centers represents not just an issue of land use, but an existential question about the future of the city. Can Atlanta continue its rapid expansion while simultaneously meeting the housing needs of its growing population?
The battle is not just happening within the city’s borders. In the suburbs, developers are transforming former industrial spaces into thriving data centers, creating a situation where available land for housing becomes more limited. While these developments are often seen as beneficial for investors and tech giants, they don’t necessarily bring the same vibrancy to neighborhoods that housing or retail spaces could.
Data Centers: The New Industry Darling
The demand for data centers is part of a larger, nationwide trend. The U.S. data center sector saw a 43% increase in inventory in 2023 and 2024, while other property types like multifamily housing and self-storage experienced growth rates of just 3% or less. Investors, sensing a lucrative opportunity, have rushed to build more facilities, particularly in urban areas that offer fast internet connectivity and proximity to tech hubs.
The proliferation of these facilities has led to unintended benefits for other sectors of real estate. For example, some office owners have found themselves leasing empty floors to data center operators looking for more space. Additionally, private-equity firms like Blackstone, which acquired data-center giant QTS in 2021, have further legitimized the sector, ushering in a new era of big-money investments.
Yet, as the competition for space heats up, the political landscape is beginning to shift. In Virginia, a state that houses much of the country’s data center capacity, Fairfax County recently restricted the construction of new centers within a mile of rail stations. Other states may follow suit, particularly as more cities, like Atlanta, see the side effects of unchecked expansion.
Can Atlanta Find a Balance?
In response to concerns over Atlanta’s data-center boom, the city is attempting to find a middle ground. A key piece of the puzzle lies in the limited nature of the resources required for these facilities. Data centers are massive consumers of both land and energy, and as the industry continues to grow, it could strain the city’s ability to provide essential services to other industries, including housing. Local utility provider Georgia Power has already warned that the sheer volume of requests for new data-center projects could overwhelm the state’s electrical grid, forcing the company to find ways to meet demand without sacrificing power to other sectors.
While the state of Georgia offers a number of tax incentives to attract data centers, including sales tax exemptions on equipment purchases, these incentives are coming under greater scrutiny. Some argue that the short-term gains from data center tax breaks are outweighed by the long-term consequences of sacrificing land and resources that could be used for more productive and job-creating purposes.
“There isn’t a single utility provider out there that isn’t being overburdened by requests,” says David Guarino, a data-center analyst at Green Street. “The challenge for cities like Atlanta is finding a way to balance the growing demands of the digital age with the needs of their communities.”
A Future in Flux
Looking ahead, the struggle over land use in Atlanta is far from over. While data centers will remain essential to the growth of the AI and tech industries, it is clear that cities like Atlanta will need to balance these demands with the need for more affordable housing and other essential infrastructure. Atlanta’s current pushback against the rapid growth of data centers is only the beginning of what could become a nationwide reckoning over how to use limited resources in a rapidly changing world.
As technology continues to shape our cities, the question will remain: Can we create a future that balances the digital economy with the needs of people? The outcome of this debate will likely shape the future of Atlanta, and similar cities across the U.S., for years to come.
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