What Data Centers Really Bring to a Market

Data centers can look like instant economic development: large sites, big construction budgets, new infrastructure, and plenty of attention from local officials, developers, and business owners. 

The reality is more uneven. A data center can reshape a local market, but the strongest effects may arrive during the build-out, not after the facility is running. That matters for bank executives watching communities, customers, municipal decisions, and business demand shift around these projects. 

In a ProSight Risk Readiness webinar on the knock-on effects of the data center boom, panelists described a market where opportunity is real, but the local benefits need to be separated from the headlines. Banks should look past the announcement and ask what kind of economic activity the project creates, who benefits, and how long the lift lasts. 

Several local effects are worth watching: 

Separate capital investment from job creation. Data centers can bring big construction budgets, infrastructure needs, and short-term labor demand. Brian Strawberry, chief economist with FMI Corporation, said the two-year build-out phase is when construction labor may be brought into a market, sparking interest in multifamily, retail, and other supporting development. Ermengarde Jabir, director of economic research at Moody’s Analytics, added the important caution: Once operational, a data center “creates very few jobs.” 

Watch the strain on local resources. Data center growth can put pressure on power, water, land availability, and labor. Strawberry said he is encouraged by emerging requirements and negotiations that may push owners to invest in the communities where they build, including support for grid stability and water infrastructure. In his view, those requirements can help separate committed owners from speculators looking for short-term profit. 

Understand the municipal trade-off. Jabir said some municipalities may welcome data centers because they can help replace tax revenue lost from weaker retail and office markets. But when local governments invest in supporting infrastructure, the costs can eventually reach households through utility bills. That makes the local bargain more complicated than a simple win for economic development. 

Do not assume every proposal becomes a project. Community opposition can change the map. Strawberry said some owners appear to be spreading their plans across several potential sites, creating more proposed projects than are likely to be built. That can raise local concern before the actual development picture is clear. 

The takeaway: Data centers can bring meaningful activity to a market, but bank leaders should distinguish between construction heat and lasting economic change. The announcement gets the attention; what matters over time is how customers, communities, infrastructure, and local business conditions actually change.