The AI infrastructure boom is no longer just about massive rural campuses. A new wave of smaller, urban data centers is emerging as tech companies push computing power closer to users to reduce latency and support real time AI applications.
From Chicago to New York, developers are repurposing old office buildings, industrial sites, and even parking structures into what many see as the next frontier of AI infrastructure.
From Gigawatt Campuses to City Blocks
The first phase of the AI buildout focused on giant data center campuses in rural areas, where companies like Meta $META ( ▼ 0.3% ) , Amazon $AMZN ( ▼ 1.39% ) , Microsoft $MSFT ( ▼ 2.15% ) , and Alphabet $GOOGL ( ▼ 2.39% ) could secure large tracts of land and abundant power. These facilities are primarily designed to train massive AI models.
Now the focus is shifting toward “edge” and inference data centers. These smaller facilities are placed near population centers so AI powered apps can respond faster and more reliably. Instead of sending every request to a distant mega campus, some processing happens closer to the user.
Industry experts expect rapid growth in these urban and suburban sites over the next several years, with new projects popping up in downtowns, former industrial zones, and areas near hospitals, universities, and research hubs.
Real Estate Meets AI Infrastructure
This shift is opening up a new opportunity for commercial real estate. Vacant or outdated office buildings could be converted into AI inference hubs, potentially drawing in high value tenants in tech, life sciences, and finance.
Equipment makers like Vertiv $VRT ( ▲ 24.49% ) are already developing systems tailored for these smaller, distributed facilities. As chips and servers become more efficient, developers can fit powerful computing setups into far smaller footprints than before.
Some forecasts see the edge data center market growing several fold by 2030, as everything from streaming and medical imaging to robotics and autonomous vehicles demands faster local processing.
Community Pushback Still a Factor
Even smaller urban sites may face resistance. Rising power demand tied to data centers has already sparked regulatory scrutiny in some regions. Industry leaders argue that urban facilities using existing buildings and infrastructure can have a smaller environmental and visual impact than sprawling rural campuses.
As AI adoption expands, the debate over where and how to build data centers is likely to intensify. But one thing is clear. The next phase of AI infrastructure will not just live in remote fields. It is moving straight into the heart of cities.