Developers scramble to meet surging data center demand in Southern California

November 14, 2024 | 4:09 P.M.

A Dallas-based firm opened a data center near downtown Los Angeles as rising demand for computing power and data storage has fueled a national surge to develop the digital hubs.

Prime Data Centers opened the three-story, 242,495-square-foot facility at 4701 S. Santa Fe Ave. in Vernon, California, that the company said is fully leased by two artificial intelligence firms.

Surging demand for storage of AI and cloud computing hardware by providers that include some of the biggest names in tech such as Amazon, Microsoft and Google has made data centers among the most active property categories for development.

Prime and other operators have announced projects to capitalize on the increased demand in Southern California, where developers are playing catch up amid a shortage of data center space, according to JLL's latest report on the industry.

The nation's data center construction pipeline nearly doubled in the first half of 2024 compared with the same period last year, "driven by insatiable demand," nearly zero availability in existing buildings and heightened interest from big investors, JLL said.

Tech giants such as Google and Microsoft are spending billions on data center development, including some that the companies hope to power with nuclear energy to meet increased electricity requirements for their growing AI and cloud computing operations.

Prime Data Centers said the Vernon facility will supply up to 33 megawatts of IT power, enough to supply power to 33,000 houses. The center is designed to provide a link with such central interconnection hubs in downtown Los Angeles as One Wilshire, which provides access to overseas cables and telecommunications networks.

Prime said its first data center in the region is fully leased by “two artificial intelligence companies.” The company did not immediately respond to a request from CoStar News about the project’s cost or details about its tenants.

However, Super Micro Computer, based in San Jose, California, disclosed in a U.S. Securities and Exchange Commission filing last summer that it signed a master colocation services agreement to take almost two-thirds of the new center’s capacity, according to previous CoStar reporting.

The Vernon opening is "the successful manifestation of an ecosystem and process coming together, resulting in high-quality digital infrastructure delivered amidst rapidly changing customer market conditions,” Nicholas Laag, Prime's founder and CEO, said in a statement.