When you think of data centers, you probably see a huge server farm in a rural area where electricity is cheap and tax breaks are plentiful. Big tech companies like Google, Amazon Web Services, Microsoft and Meta have put millions of square feet of server space in places like Northern Virginia or Hillsboro, Oregon. But now, to reduce the leg times, companies are weaving more and more knots in the fabric of cities in their networks. The One Wilshire Building in Los Angeles, for example, was formerly home to a network of law offices that now oversees one-third of all Internet traffic between the US and Asia.
For the uninitiated, these urban physical internet nodes may not look like that at all. And that is by design. Equinix, the largest owner of Collocation Data Centers with 10.9% of the world market, operates data centers that are not generally considered attractive. In Dallas, the company owns a large industrial building just outside the city center that doubles as a data center hub and the headquarters of a for-profit college. In Tokyo, the operation is mostly carried out on different floors in the sea of the city’s skyscrapers, “so you don’t even know it’s there,” says Jim Poole, the company’s vice president of business development. In Sydney, Australia, Equinix is building a new data center in an expressionist style, in contrast to the city’s famous Opera House. And around one of its facilities in Amsterdam, Equinix built a pit – less for safety, Poole says, given that Amsterdam is a city of canals, rather than making the building match the environment around it. “Most of the time, people really try to make their buildings more environmentally friendly,” he says, adding that sometimes local regulators need it.
Demand for such facilities, especially in urban centers, is growing rapidly: last year, spending on collocation data centers increased by 11.7%. Even the largest cloud companies are not far behind. Amazon Web Services is pushing for compressed data centers, which it calls local zones, close to large populated areas; So far, he has placed them in 32 cities across the U.S. The trend has also sparked interest from Walmart, which may soon start renting portfolios from its superstores to host data centers for third-party companies.
Poole says one explanation for the demand surge is that consumers themselves have changed. As more of our lives go online, “people’s tolerance for latency is steadily declining,” he says. The key drivers are apps where millisecond delays can be significant: you won’t see quarter-second lag on Netflix, but you will definitely see it if you use an online sports betting app, trade stocks, or participate in multiplayer. Game like Fortnight.
Companies like Google, Amazon, and Microsoft, for example, bet on cloud gaming, which includes streaming games on the Internet without a console or phone to provide processing power. But many popular games, such as first-person shooters, “require a lot of quick reaction time and therefore really fast connectivity,” says Jabez Tan, head of research at the firm Structure Research. And games like this wouldn’t work on a streaming service without the help of a large number of data centers.