In Southern California, the race to build data centers is on

Where Wilshire Boulevard begins in downtown Los Angeles, thousands of miles of undersea fiber-optic cables disappear into an ordinary-looking office tower.

One Wilshire is the mother of all data centers in the West, a discreet terminus for major digital connections between Asia and North America that help meet the world’s endless needs for data storage and computing power.

Once a workplace for lawyers and other white-collar workers, the mid-century office building’s 30 floors are now filled with cables, pipes, coolers, generators and other equipment needed to support the online functions that power the economy and our privacy at unprecedented speed. . (If you could get inside — and you can’t — the building’s Internet connection would give you a split-second head start on everyone else when tickets to the World Series or a concert went on sale.)

“We are all data center consumers,” whether it’s browsing social media on our smartphones, watching streaming services like Netflix on TV, or ordering dog food delivery on our phones. laptops, said Maile Kaiser, chief revenue officer of data center operator CoreSite. , One Wilshire’s largest tenant. “Any content we create is stored in a data center.”

The digital transformation of One Wilshire, which is nearing completion with the recent departure of one of the last conventional tenants, is part of a larger real estate boom underway in Los Angeles County.

As artificial intelligence and cloud storage take up more and more space on the nation’s computer servers, real estate developers are rushing to build new data centers or convert existing buildings to use data. The need is so great that they are struggling to keep up with demand, as companies looking for secure locations for their servers rent almost every square foot that becomes available. Large-scale backup generators to maintain 24/7 operations in the event of a power outage are rare.

Construction of new data centers is reaching “extraordinary levels” due to “insatiable demand,” according to a recent industry report released by real estate brokerage firm JLL.

Electrician Oscar Rivas works on a new generator system on the third floor of One Wilshire, a high-rise office building that has been almost completely converted into a data center in downtown Los Angeles.

(Genaro Molina/Los Angeles Times)

“Never in my 25-year real estate career have I seen such demand on a global scale,” said JLL real estate broker Darren Eades, who specializes in data centers.

The main drivers are AI and cloud service providers, which include some of the biggest names in technology, such as Amazon, Microsoft, Google and Oracle.

While the occupancy rate of conventional office buildings is still in sharp decline due to the effect of the COVID-19 pandemic and property values ​​are declining, data centers represent a rare and interesting opportunity for real estate developers, who are looking for opportunities in major markets such as Los Angeles and less urban locations. which are powered by abundant and preferably cheap energy needed to operate data centers.

“If you can find a powerhouse group to build a site, they will come,” Eades said of developers.

Construction is happening at an “extraordinary” pace across the country and still not keeping pace, according to the JLL Data Center Report said. “The vacancy rate fell to a record low of 3% mid-year due to insatiable demand and despite rampant construction.”

Development has increased more than sevenfold in two years, with the pipeline of new projects stabilizing in the first half of 2024, a potential sign that the U.S. power grid cannot support faster development.

The satellites and antennas are perched on the roof of One Wilshire.

(Genaro Molina/Los Angeles Times)

But when projects currently under construction or planned are completed, the U.S. colocation market, in which companies rent space in a data center owned by another company for their servers and other computing hardware, will triple in size by compared to current levels.

With the release of OpenAI’s ChatGPT in November 2022, AI-based products and platforms have become ubiquitous overnight, JLL said. The enormous amount of computing power required by generative AI has the greatest impact on data storage, followed by the continued growth of the cloud.

Real estate investors and landlords are attracted to the market because tenant demand is strong and they are likely to renew their leases after meeting the costs of setting up data centers.

“They’re investing in their space and your space and tend to stay there longer,” said Mark Messana, president of Downtown Properties, which has offices in Los Angeles and San Francisco. “As we all know, the office market is struggling a bit, so it’s nice to have a few data customers in the mix.”

Rents at One Wilshire, for example, can be double those of new downtown office buildings, according to real estate data provider CoStar.

Servers, power lines and cooling equipment have almost entirely taken over the building which was once a prestigious address for businesses. There are electrical conduits running up into the stairwells and cable brackets hanging from the ceilings. Two elevators were removed so that the empty shafts could hold water pipes used to keep the temperature cool enough for the heat-producing servers.

Crypto.com Arena is seen from the roof of One Wilshire.

(Genaro Molina/Los Angeles Times)

The recent departure of a law firm that had been in the building for more than 50 years freed up five floors that will quickly be re-leased to data tenants, said Eades, who represents the landlord.

Challenges in the growing data center industry include finding qualified workers to manage facilities 24 hours a day, seven days a week.

“These are high-paying, high-demand jobs,” Eades said, with employers looking for computer science and engineering majors out of college.

However, this work can have harmful consequences on workers. Working hours are long in closed buildings with limited contact with the outside world, and night work “can be difficult for employees to endure,” the report said. Thirty percent of data center employees have quit in the past year, citing dissatisfaction with their work-life balance, according to the JLL report.

Filling second- and third-shift jobs can add an extra month or more to the hiring process due to candidates’ reluctance to work outside of regular hours, even when they pay more than day jobs, the report says .

Southern California is suffering from a shortage of new data centers as new users enter the market daily and demand continues to grow, JLL said. This is spurring the development of smaller markets in Los Angeles County, like Vernon, which has its own power plant that provides electricity at cheaper rates than surrounding cities.

Monterey Park, which is served by Southern California Edison, is also “a hot area,” Eades said, where two new developments will be announced over the next month.

Demand for power for computing is growing to a point where it threatens to strain the country’s power grid, sending users to remote locations where electricity is plentiful and, preferably, cheap.

Data center developers work in Alabama, the Dakotas and Indiana, “states that traditionally don’t have data centers,” Eades said.

A company called CalEthos is planning a data center near the southern shore of the Salton Sea in California’s Imperial County. Power for the data center servers would come from geothermal and solar power plants built near the site, in an area known as Lithium Valley. This data center would cover an area the size of 15 football fields and require electricity that can power 425,000 homes.

Data centers have long been heavy users. But the specialized computer chips needed for generative AI use much more electricity because they are designed to read large amounts of data.

The new chips also generate so much heat that it takes even more energy and water to keep them cool.

By 2030, data centers could account for as much as 11% of U.S. electricity demand, up from 3% currently, according to analysts at Goldman Sachs. Last week, an agreement was announced for reopen the infamous Three Mile Island nuclear power plantn Pennsylvania to power Microsoft data centers running cloud computing and AI programs.

The plant, site of the nation’s worst commercial nuclear accident in 1979, was shut down five years ago because it was losing money. Microsoft has agreed to buy the plant’s electricity for 20 years if regulators approve its revival.

“There will always be a need for a data center,” Kaiser said. “Everyone loves creating their own content now, whether it’s a photo, a video or online shopping, we all do it. Now we will see what we do with AI.

Times Staff Writer Melody Petersen contributed to this report.