Watch These Markets Carefully
by Carole VanSickle Ellis
In February 2024, the United Nations released its annual Environmental Report, warning “nearly two-thirds of our world’s population experiences severe water shortages for at least one month a year” and suggesting water use be “decoupled from economic growth.” This, the U.N. analysts said and many other economists and environmentalists echoed, would be the only way to deal with an impending water crisis. Around the same time, the popularity of generative AI boomed, with Google, Meta (Facebook), and Microsoft all releasing competing models and aggressively jostling for market share in business and workflow.
Given that a single AI query may consume roughly 16 ounces of water by the time a user closes the conversation, it is likely obvious that water and economic growth did not “decouple” in the two years since that U.N. report. In fact, the data centers that support AI platforms like Gemini, OpenAI, ChatGPT, and others may consume between one million and five million gallons of water each, every single day.
With more data centers springing up quietly and constantly, investors must become aware not only of how to spot these quiet, thirsty behemoths, but also how to evaluate their present and future impact on their local markets.
The Hidden Costs of Data Centers
While most internet users think of “the cloud” as something ethereal and insubstantial, the truth is that the information in our many personal and professional “clouds” is housed in a physical location, not somewhere in the ether. As more and more of our lives and our economic engines move online, those physical locations must physically expand in order to contain it. While a file on your computer might not feel as if it has physical weight and heft, the storage unit for the backup for that file has both, in large part because the servers and associated infrastructure required to sustain your pictures and videos, not to mention professional content and vast search activities, have specific and vast requirements in order to remain functional.
In northwest Atlanta, Georgia, for example, there is a 99-acre campus dedicated to housing not only the computer systems needed to maintain the data, but also the power supplies and backup power supplies that keep the center running continuously, the high-powered cooling systems that prevent the entire operation from literally melting down, and elaborate fire protection and security networks that operate both passive and active elements to protect the integrity of the data help within, and this is just one of somewhere between 155 and 180 data centers operating in the area.
These huge, quiet pieces of digital infrastructure bring large amounts of tax revenues to local municipalities as well as a certain element of prestige. The state of Georgia has, until recently, proudly promoted its efforts to bring data centers into the state, waiving nearly $300 million in sales and use taxes for data centers in 2025 alone. Those efforts have been successful; CBRE reported that in 2025, Atlanta boasted the biggest percentage increase in construction of data centers in the country. Now, however, some lawmakers are walking back their support as the environmental costs of hosting data centers begin to come to light.
Data centers operate best when there is easy access to water, which is used to help keep servers cool, making the Great Lakes region of the U.S. highly attractive for data center construction. However, the Great Lakes Commission warned in December 2025 that water levels in these huge freshwater oceans are falling, making the emergence of constantly parched data centers in the region a serious threat to the aquatic ecosystem. Data centers often bring sorely needed funds to rural infrastructures in the Great Lakes region, helping shore up school systems and rebuild aging infrastructure. The centers also bring temporary employment booms, hiring hundreds of local workers during the construction phase, although, once complete, many centers can operate with a team of as few as thirty.
For the Great Lakes, the centers represent another problem: Because data centers draw in cold water and release warm water into local wastewater systems, they represent an existential threat to marine life in the area. Releasing large volumes of warm water into the Great Lakes might seem like a responsible way to put some of the water back, but, in reality, that warm water lowers oxygen levels, promotes toxic algal blooms, encourages the growth of harmful parasites and aquatic diseases, and disrupts breeding and habitats for whitefish, trout, and walleye.
Furthermore, roughly 80% of the water used by data centers is considered “consumptive,” meaning it is not returned to the source anyway and, instead, evaporates. With lake levels already falling, this could be bad news for economies reliant on fishing, tourism, and even, to some degree, shipping, manufacturing, and farming, all of which may suffer if those industries’ water needs converge with the massive demand from data centers in the area.
David Gattie, a professor of engineering and a senior fellow at the University of Georgia’s Center for International Trade and Security and School of Public and International Affairs, specializes in energy policy, power generation, and energy systems and associated environmental issues. He believes the key to managing data center construction and operation productively lies in creating a regulative infrastructure that may be used to respond to data centers strategically.
“We do not need data centers…dictating terms to us. We dictate terms to them,” he said during a Georgia energy subcommittee meeting. Gattie noted that data centers bring in tax revenues and high-paying technical jobs; Amazon Web Services data center engineering techs may have starting salaries of more than $133,000.
“There have to be data centers; there has to be AI because this is a tip-of-the-spear 21st century competition around a technology that is going to have national security implications,” said Gattie, who is known for his measured support for the centers.
When the Wild West Comes to Your Market
Not everyone views data centers as an acceptable risk for their communities, however. Lincoln Institute of Land Policy staff writer Jon Gorey describes data centers as being “vampire[s] of sorts — pallid immortal, thirsty. Sheltered from sunlight, active all night [and] can only enter a place if it’s been invited inside.”
Gorey noted in an article on the topic published in October of last year that many states and counties are “actively luring [data centers] in with tax breaks and other incentives.”
At first glance, this seems like a good idea. After all, data centers bring benefits, including employment, a growing population, and claim to a stake in what Gorey calls “the explosive growth surrounding artificial intelligence.”
In Marana, Arizona, however, local residents want to uninvite their latest proposed data center project by putting it to a vote on the local ballot this spring. Marana residents hope to dissuade their municipal government from approving data centers, generally, and a pending project in particular. Small towns like Marana suffer outsized side effects when data centers move in because they often are not prepared to handle the strain on their power grids or local water supply. Fortunately for these small towns, it is often easier to fend off a data center using the power of the ballot in towns with smaller populations because it is easier to get the issue on the ballot, as Marana has done. It remains to be seen if Marana’s efforts to banish the center will be successful and on what scale they may be repeatable.
“For many homeowners, particularly in rural or previously untouched areas, the change in landscape and water or power usage can feel significant,” said Eric Bramlett, a Texas broker operating in many data center hotbed markets in his state. Bramlett said real estate agents “often see two opposite reactions at once” when a new data center project is announced. He explained investor interest in the area rises in anticipation of “new jobs, an influx of buyers, a stronger tax base, and infrastructure improvements.” However, retail buyers may avoid the area due to concerns about construction noise, traffic congestion, issues with power and water consumption, and the general, low-level, whirring hum generated from within these otherwise unobtrusive buildings.
It is difficult to say whether proximity to data centers will hurt property values in the long-term simply because these operations have not existed long enough in high enough concentrations to draw firm conclusions. However, it is entirely safe to say that the traditional rules and economic indicators for market growth may not apply in the case of an area where a data center is creating the indicators that have typically meant growth and appreciation were coming. Since data centers are often built in areas with strong infrastructure already or include the implementation of that strong infrastructure as part of their own promotional packages when dealing with local governments, it will take time to determine whether data center present will help or hinder market strength in the long run.
Data Centers by the Numbers
5 Million // Number of gallons of water consumed by larger data centers every day
25,000 // “Conventional” cloud centers that store work documents or streaming videos draw as much electricity as 25,000 homes every day
100,000 // “Hyperscale” data centers, which focus on AI, use as much power as 100,000 homes daily
176 // The number of terawatt-hours of electricity consumed by U.S. data centers in early 2023 (this is roughly as much as the entire nation of Ireland)
300 // Number of data centers in northern Virginia, the region with the densest concentration of data centers in the world
155-180 // Estimated number of data centers in the Atlanta, Georgia area, thanks to the city’s rating as a top AI-related infrastructure hub and investments from major tech companies. Georgia does not have a comprehensive state database of data centers in the state.
