Los Angeles developers are flocking to suburbs with untapped and relatively cheap power to launch a wave of new data centers with stronger floors, higher ceilings and advanced cooling systems to serve surging demand.
Vernon, a city about 4 miles from downtown Los Angeles with an independent power supply, is one such growing hub for data center users and developers scouting for high-tech space in the nation's most populous county.
A 50-megawatt project developed by Prime Data Centers at 4701 S. Santa Fe Ave. in Vernon leased up last year before construction was complete, while Sydney-based Goodman Group broke ground in March on Goodman LAX01 Vernon, another 50-megawatt facility that marks the firm's first investment in digital infrastructure.
Southern California’s data center supply has nearly doubled since 2020, but demand for top-tier space that can handle artificial intelligence, cloud computing and other high-tech industries is still outpacing availability, according to a report from JLL. Net absorption hit 11 megawatts in the first half of 2025, with another 100 megawatts under construction and 300 megawatts in planning.
These new projects come as Southern California’s data center vacancy rose from 9% at the end of 2024 to 14% by mid-2025, JLL reported, as older properties become obsolete and lag behind the new supply.
“The winners are the state-of-the-art facilities designed for liquid cooling and high-density demand. That’s what tenants are lining up for,” Darren Eades, a managing director at JLL who represents developers working on data center projects across the region, told CoStar News.
In search of cheaper pastures
Data center developers traditionally want to position their properties close to the West Coast data hub at One Wilshire in downtown Los Angeles for connectivity, but they're increasingly finding power sources farther afield, Eades said.
Electricity in Southern California is pricier than in any other U.S. data center market, according to JLL. And land is so expensive and scarce that developers often have to go vertical to achieve the needed size. Nearby hubs such as Las Vegas and Reno, Nevada, have long offered a cheaper alternative — with power costs as little as one-third of Southern California’s — but those markets are now running short on space, Eades said.
California also limits data center projects to a 50-megawatt threshold while other states go as high as 500 megawatts. Lengthy environmental reviews and a lack of incentives have also kept development at bay, Eades said. Local officials are moving to loosen some of those restrictions, he added.
Vernon’s advantages — in particular, cheaper electricity — have made it a hotbed for new development, with projects already in lease-up or under construction and more in the pipeline. Its independent power supply has been the difference-maker compared with other Los Angeles submarkets.
Meanwhile, in the San Gabriel Valley, Monterey Park is emerging as the next growth node where developers are tapping excess substation capacity for several 50-megawatt projects, Eades said. Developers are lining up to convert older properties into vertical, high-density facilities built to handle liquid cooling and power-intensive loads.
In December, Australian asset manager HMC Capital paid $39 million for two vacant office buildings at 1977 Saturn St. and 1980 Saturn St. that it plans to convert into a state-of-the-art data center.
Powering up
Southern California's total data center capacity now stands at 355 megawatts, making it the 13th-largest data center market in the U.S., with enough electricity to power more than 250,000 homes. That supply is expected to nearly double as projects currently planned or underway are completed, according to JLL.
Northern Virginia remains far ahead with 5,574 megawatts of operating capacity and nearly 7,000 megawatts in the pipeline.
Building in Southern California comes at a steep cost. Developers estimate $15 million to $18 million per megawatt, far higher than in competing states. Lengthy utility studies or entirely new substations can stretch project timelines by years, Eades said.
Older facilities in the Los Angeles region are increasingly left behind because they lack the specialized infrastructure new tenants require.
"With these new servers and high-density demand and liquid cooling, if you are able to build a state-of-the-art data center, you'll be able to lease it out," Eades said. "And we're going to see a lot of those coming to market very soon."