A Southern California city just passed the nation’s first permanent ban on data center development, but some builders are already working to get ahead of the pushback: They're pivoting investment strategies as dozens of other cities weigh similar measures.
In Monterey Park, about eight miles east of downtown Los Angeles, voters approved Measure NDC with roughly 86% support in a June 2 special election. It's believed to be the nation’s first ban on data center development enacted through a ballot initiative, as lawmakers and local officials seek to limit the physical backbone of artificial intelligence, often criticized for using too much water and power.
To get ahead of such community opposition, some developers are moving away from contested ground-up projects to invest in existing industrial properties, adaptive reuse opportunities and jurisdictions that actively support digital infrastructure. Others are abandoning such projects altogether.
It's all unfolding as federal lawmakers propose a national moratorium on certain AI-focused facilities and Maine considers what could become the nation’s first statewide pause on new data center construction. Meanwhile, communities from Seattle to Iowa and Arkansas debate data center moratoriums, zoning changes and stricter oversight.
The era of unconstrained expansion in the industry appears to be over, and community sentiment and local regulations have joined power and land availability as pivotal factors in deciding where and how projects are built, John McWilliams, Cushman & Wakefield’s head of data center insights, said in an interview.
“The new regulations that are popping up in local jurisdictions are directing growth, not preventing it," McWilliams said.
Supporters of data center development argue that restrictions could simply push investment, jobs and tax revenue into competing jurisdictions rather than slow the industry’s expansion. Major technology companies, including Microsoft, Amazon, Alphabet and Meta, are spending hundreds of billions of dollars this year on AI infrastructure, underscoring the depth of demand driving the sector.
Developers seek certainty
Developers and investors in the data center space are responding by concentrating new projects in jurisdictions that offer regulatory certainty, available power and political support. In Southern California, cities such as Vernon have emerged as alternatives amid mounting opposition elsewhere.
A 50-megawatt facility developed by Prime Data Centers in Vernon was fully leased before construction was completed, and Goodman Group is building a large project there as investment is increasingly flowing toward communities that welcome digital infrastructure.
The data center industry is also moving farther away from its traditional coastal and urban hubs. Instead of focusing on such markets as Northern Virginia, Silicon Valley and downtown Los Angeles, developers are pushing into rural areas of Idaho, Louisiana, Texas, Ohio, Indiana and the Midwest, where land is much less expensive, power may be easier to secure, and local officials may be more receptive to large-scale development.
Some developers are bypassing cities altogether. Industry analyst Dylan Patel recently noted in a social media post that large AI projects are increasingly being proposed on unincorporated county land.
That's where developers can avoid city council approvals, municipal zoning votes and other local reviews that have become flashpoints in communities such as Monterey Park.
Other developers have responded to public outcry by scaling back their proposals.
'Shark Tank' investor switches gears
In Utah, celebrity “Shark Tank” investor Kevin O’Leary said in recent days that he would cut the project size for a 40,000-acre AI data center campus in half after mounting backlash over the development’s size and environmental impact.
Half of the remaining 20,000 acres would be set aside as agricultural or wildlife, O’Leary said in a letter Thursday to Utah state Senate President Stuart Adams.
“The biggest change I’m seeing is that developers are getting involved in public engagement earlier in the process,” Cushman’s McWilliams said. “They want to get in front of the community before they even start chasing down approvals.”
Some companies are also trying to blunt opposition before it hardens. Microsoft has rolled out a “community-first” initiative that includes pledges to cover utility costs, avoid raising local electricity bills, replenish water supplies and pay local property taxes, while Meta, which announced plans in late 2024 to build a 4-million-square-foot data center campus on a 2,250-acre site in rural Louisiana, has highlighted the economic benefits resulting from data center investment.
Investors are adjusting their strategies as well.
Brookfield Asset Management’s acquisition of a vintage Silicon Valley data center illustrates how some firms are pursuing existing facilities and adaptive reuse opportunities where entitlement risk may be lower than starting from scratch in a community where the risk of running into local resistance may be higher.
In Monterey Park, the developers behind the abandoned proposal have already shifted course. After withdrawing their application and declining to challenge the ballot measure, company officials said they would work with the city to identify productive land uses for the property that align with community priorities, potentially including housing or other community-serving development.
Monterey Park vote
Monterey Park’s Measure NDC grew out of opposition to a proposal by developers HMC StratCap and Digico Infrastructure REIT to repurpose a vacant office complex into a nearly 250,000-square-foot hyperscale data center.
Pushback built steadily over months as residents raised concerns about environmental impacts, noise and the long-term use of scarce industrial land.
Developers ultimately pulled the plug on the project in response to the feedback, with company officials noting they would not stand in the way of the moratorium that arose from the opposition.
City officials said the ban is intended to protect air quality, drinking water resources and public health while avoiding higher electricity and water rates.
Residents also raised concerns about noise, environmental impacts and the long-term use of scarce industrial land.
The push for restrictions is spreading to various levels of government. In March, Rep. Alexandria Ocasio-Cortez and Sen. Bernie Sanders introduced the Artificial Intelligence Data Center Moratorium Act, which would pause certain AI-focused data center development nationwide.
The proposal remains stalled in committee and has no companion measure advancing in the House. Still, its introduction in Congress reflects how concerns once confined to local planning commissions have reached Capitol Hill.
State lawmakers focusing on data center issue
At the state level, at least a dozen states have considered or are considering moratoriums or other limits on data center growth, citing concerns about electricity demand, environmental impacts and pressure on power grids. Maine appears closest to taking action, with lawmakers weighing a statewide pause that would last through November 2027 and could become the first such measure enacted in the country.
Local governments have moved even more aggressively. More than 100 counties, cities and other jurisdictions have enacted or proposed temporary bans or moratoriums while they study the effects of data centers on infrastructure, water supplies and land use.
Seattle is among the latest examples where a proposed one-year moratorium is advancing through the City Council as officials debate how data centers fit into the city’s long-term climate and development goals.
The debate has attracted support not only from neighborhood activists but also from some employees of major technology companies.
“In my job, I see the consequences of an all-costs-justified AI buildout,” Liesl Wigand, who identified as a senior software engineer and member of Amazon Employees for Climate Justice, said Wednesday in a public hearing by the Seattle Land Use and Sustainability Committee. "This culture is omnipresent across tech. That’s why local governments in collaboration with community stakeholders should be setting the terms for data center buildouts."
“Let’s not let big tech burn Seattle to win the AI race,” Wigand said.
Data center concerns are tied in part to the growing strain on power systems. Electricity prices have climbed in recent years as demand from data centers accelerates, and analysts say the available capacity on existing grids is quickly diminishing, according to recent analysis by CoStar National Director of U.S. Industrial Analytics Juan Arias.
Real estate services firm JLL echoed that shift in its latest global data center outlook, noting that “community acceptance and political risks are increasingly influencing project timelines.”