A new analysis from the Institute of International Finance (IIF) concludes that understanding data center geography requires looking well beyond simple facility counts. Drawing on data from the Pacific Northwest National Laboratory’s IM3 Open Source Data Center Atlas, the authors examine where data centers are clustering and how capacity is distributed across regions.
According to the report, the highest concentration of data centers is found in large population hubs. Examples highlighted include Virginia’s Data Center Alley and California’s Silicon Valley, both of which host dense clusters of facilities. However, the authors emphasize that concentration does not necessarily equate to the largest installed capacity.
The report notes a clear distinction between data center counts and the scale of individual facilities. In densely populated areas, data centers tend to be smaller, even when they are numerous. By contrast, the largest hyperscaler campuses are increasingly sited in less-populated regions of the country, where projects can aggregate substantial capacity on a single site.
Those larger hyperscale developments are most commonly located in the Pacific Northwest, the Southwest, the Southeast and the Midwest. The authors link this pattern to the availability of both power and land in those regions, suggesting that these fundamentals are important to the buildout of large-scale campuses.
At the same time, the report is careful not to overstate causality. While regions with extensive power generation and land availability are also home to sizable data center campuses, the authors caution that the data do not clearly show whether abundant power attracts new development or if power generation is expanded in response to data center demand.
The analysis also addresses the role of public policy. Tax incentives are discussed as part of the data center location equation, but the report finds that incentives alone are not sufficient to explain siting decisions. Instead, tax treatment is described as a single component within a broader framework that includes power availability, infrastructure, land costs and proximity to end-user demand.
Overall, the IIF findings portray data center geography as the outcome of multiple intersecting factors rather than a simple response to any single driver. Market participants evaluating data center opportunities are encouraged by the authors to consider how capacity, power, land and demand all interact across different regions, rather than relying solely on facility counts or headline incentive programs.
The report underscores that additional research is needed to better understand how these factors evolve over time and how infrastructure and power systems respond to continued data center expansion.
