The size of the market for colocation data centers in San Antonio and Austin has quadrupled since 2020, according to a new report.
In Castroville , west of San Antonio , technology giant Microsoft Corp. is turning swaths of empty farmland into sprawling data centers. In the Hill Country , east of that project, two data centers are set to rise on a country road near San Marcos .
A flurry of the power-hungry facilities are under construction in and around San Antonio and Austin, which lead the U.S. in the growth of so-called colocation data centers over the past five years, according to a new report by JLL. With colocation facilities, businesses rent space for their equipment rather than building and managing their own data centers. The size of the San Antonio-Austin market — measured in terms of the power the data centers consume — has quadrupled since 2020, according to the commercial real estate services firm. JLL, which lumps the two cities together, said some 646 megawatts worth of the facilities have been built in the area, another 664 megawatts worth is under construction, and another 1,229 megawatts worth is planned. The vacancy rate is just 4%. “We’re seeing really insatiable growth,” said Curt Holcomb, JLL’s managing director of data centers solutions. RELATED: Texas ‘open’ for data center boom as lawmakers grapple with its challenges The growth of artificial intelligence and cloud services underpinning people’s digital activities is fueling the data center boom nationwide, Holcomb said. Colocation facilities in particular have become more popular because it’s less expensive for companies to rent space and equipment than it is to build and operate their own data centers, he said. Texas is a hot spot for the facilities in part because the Electric Reliability Council of Texas can increase generation capacity and do so at a faster pace compared with grid operators in other states, Holcomb said. “We’re seeing more demand in Texas than any other region, and it’s because of the availability of fuel going forward,” Holcomb said. There’s also plenty of undeveloped land across the state for the sprawling centers. Developers of large colocation and hyperscale facilities are often searching for 500-plus acres and upward of 500 megawatts to 1 gigawatt of power, Holcomb said. Access to power and fiber infrastructure, fairly flat topography and few natural disasters have made San Antonio an attractive location for data centers. The federal government, including the military branches and agencies such as the National Security Agency that have operations in the area, increasingly is using local colocation facilities, Holcomb said. RELATED: Trump and tech bosses announce ‘Stargate,’ $500 billion data center project that’s starting in Texas Along with Microsoft and the NSA, Valero Energy Corp., Frost Bank, Christus Health, Lowe’s and Amazon have data centers in the area. CloudHQ, Stream Data Centers and CyrusOne have built or are working on multiple facilities. But ERCOT and utilities across the state, including San Antonio’s CPS Energy, are grappling with the crush of power needs for the facilities and are under pressure to increase capacity. City-owned CPS expects to spend $1.3 billion on transmission and generation projects over the next five years to keep up with demand. It is building more switching stations, which help manage the flow of electricity and can be used to reroute power in case of an emergency. “The growth in Texas and all the power flows that are changing with renewables and retirements and generation … it’s putting strains on the system that nobody’s ever seen before,” Richard Medina, CPS’ chief delivery officer, said during a meeting in November. RELATED: In the Hill Country, a tale of two data centers But adding infrastructure takes time. For example, it takes three to five years to design and build transmission lines, said CPS spokesperson Milady Nazir. “CPS Energy is proactively meeting with stakeholders to understand their needs and clearly manage expectations around CPS Energy’s ability to create the infrastructure to support growth,” Nazir said. “Every major metropolitan area experiencing rapid growth is having to think about these large power customers differently, especially areas with high population growth.” Last year, major local data center operators formed a lobbying group called the Energy Forward Alliance to ensure CPS has the juice and infrastructure they need to keep expanding and building facilities. The group has met with CPS executives. In its report, JLL said data center development in San Antonio “will remain stagnant” until CPS can expand capacity. The utility’s supply is already spoken for, and more capacity isn’t expected until the late 2020s, according to JLL. That has prompted some data center developers to seek power from electric cooperatives in the surrounding areas, including the Medina Electric Cooperative west of San Antonio and the Pedernales Electric Cooperative in the Hill Country. The not-for-profit Medina Electric provides power to more than 35,000 meters across 17 counties in South Texas and works with the South Texas Electric Cooperative, its generation and transmission provider, on power for data centers, said spokesperson Jacquelyn Muennink. Customers contribute to construction costs and pay for distribution upgrades “as needed.” “To support growing loads in our service area, Medina Electric Cooperative continuously makes upgrades to the infrastructure for continued reliable power delivery. Infrastructure improvements required for large load requests are incorporated into the construction costs for those accounts,” Muennink said. Pedernales Electric didn’t immediately respond to an inquiry. The same trend of turning to electric cooperatives is playing out in Austin, Holcomb said. “The development that’s taking place already has commitments from the utilities and ERCOT to deliver power, but there’s so much more demand than what’s already been agreed to that we’re running out of capacity all over the state,” Holcomb said. “San Antonio is not really any different than other areas of the state.”
Microsoft Corp. National Security Agency Medina Electric Cooperative South Texas Electric Cooperative Stream Data Centers Electric Reliability Council Of Texas Valero Energy Corp. Pedernales Electric Cooperative Lowe's Frost Bank Christus Health Amazon CPS Energy Energy Forward Alliance Curt Holcomb Jacquelyn Muennink Richard Medina Trump San Antonio South Texas Austin Hill Country Castroville San Marcos U.S. Cloudhq Cyrusone Pedernales Electric Stargate
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