Cooling Efficiency and Water Risk in 2025–2030 Data Center Planning

Our previous issues examined electricity procurement, interconnection queues, and the limited availability of firm grid capacity. While these limitations are serious considerations for data center development, water consumption and heat rejection now represent the next material constraints.

A typical 100 MW data center using evaporative cooling consumes approximately one to four million gallons of water per day, comparable to municipal demand from a population of 30,000–50,000. In regions with high data center concentration and/or limited water resources— such as Northern Virginia, Arizona, and Texas—local utilities and regulators are increasingly scrutinizing water use and, in some cases, imposing stricter requirements than those applied to power procurement.

Waste heat recovery is also gaining traction, with district heating operators in Europe and early U.S. pilots compensating data centers for recoverable thermal energy (such as Amazon’s Doppler Tower in Seattle and one of Equinix’s Toronto data centers).

This issue presents current water-intensity benchmarks by cooling technology, identifies the most constrained hydrologic basins through 2030, and outlines the three principal mitigation strategies currently being deployed or tested at scale: dry cooling with heat reuse, immersion cooling, and closed-loop systems using alternative water sources.

So without further ado, let’s continue our exploration into data center development.

Water-Constrained Regions (2025–2030 Risk Assessment)

• Northern Virginia: Dominion Energy and local utilities have introduced water-impact reviews for large new loads; regional demand growth is projected to place increasing pressure on potable and wastewater capacity.
• Arizona: Salt River Project and Arizona Public Service have restricted or discouraged high-water evaporative cooling for new campuses, with low-water designs now effectively required for approvals.
• Georgia: The Public Service Commission has implemented additional scrutiny and conditions on water use for new data center certificates.
• West Texas: Groundwater conservation districts routinely limit or deny new cooling-tower permits, pushing operators toward air-cooled systems or produced-water reuse.

Microsoft’s Closed-Loop Cooling System. Source: GeekWire.

Principal Mitigation Strategies

1. Dry Cooling with District Heat Recovery Several operators in Northern Virginia and Europe are piloting district-heating loops that deliver low-grade waste heat to residential and commercial users. Early contracts demonstrate economic viability by partially offsetting the PUE penalty of air cooling.
2. Immersion Cooling Microsoft has deployed single-phase immersion cooling in multiple U.S. facilities. Other hyperscalers are evaluating or contracting immersion solutions for 2026–2028 delivery.
3. Closed-Loop Systems with Alternative Sources Facilities such as xAI’s Memphis, TN campus treat and reuse up to 13 million gallons per day of municipal wastewater. Similar approaches using treated produced water or recycled sources are under consideration in water-stressed regions of Texas and New Mexico.

Microsoft’s Zero-Water Cooling for Data Centres. Source: DataCentre Magazine.

Regulatory Developments

• Arizona utilities and the Corporation Commission continue to tighten water-use standards for new data centers, with further guidance expected in 2026.
• Virginia regulators are exploring frameworks to incentivize waste-heat recovery.
• The EU Energy Efficiency Directive is phasing in waste-heat reuse reporting and targets (10–20% by 2026–2028 in several member states), influencing global design standards for operators with European footprints.

Conclusion

Water availability has emerged as an independent gating factor alongside electricity. Sites permitted before 2024 under traditional evaporative cooling increasingly face retrofit requirements or restrictions on expansion.

Projects targeting commercial operation between 2027 and 2030 will predominantly incorporate water consumption below 50 gal/MWh from the outset and, where feasible, treat waste heat as a recoverable resource.

Viable configurations include air-cooled or immersion halls with district-heating agreements in the Mid-Atlantic and parts of Texas, closed-loop wastewater reuse in the Southwest, and immersion systems in the Southeast.

These designs deliver total PUEs competitive with legacy evaporative campuses while substantially eliminating hydrologic risk.

For a confidential consultation or a complimentary opinion of value of your property please give us a call.

Until next week…

Goran Brelih and his team have been servicing Investors and Occupiers of Industrial properties in Toronto Central and Toronto North markets for the past 30 years.

Goran Brelih is an Executive Vice President for Cushman & Wakefield ULC in the Greater Toronto Area.

Over the past 30 years, he has been involved in the lease or sale of approximately 25.7 million square feet of industrial space, valued in excess of $1.6 billion dollars while averaging between 40 and 50 transactions per year and achieving the highest level of sales, from the President’s Round Table to Top Ten in GTA and the National Top Ten.

Specialties:
Industrial Real Estate Sales and Leasing, Investment Sales, Design-Build and Land Development

About Cushman & Wakefield ULC.
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 countries.

In 2020, the firm had revenue of $7.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com.

For more information on GTA Industrial Real Estate Market or to discuss how they can assist you with your real estate needs please contact Goran at 416-756-5456, email at goran.brelih@cushwake.com, or visit www.goranbrelih.com.

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