First Street research shows that the world's largest and fastest-growing data center markets are concentrated in regions

A new First Street analysis finds that climate risk is emerging as a critical factor in data center investment performance, with physical hazards increasingly shaping operating costs, infrastructure reliability, financing conditions, and long-term asset values across global markets. The research examined 97 global data center markets and found that many of the industry's largest and fastest-growing hubs are concentrated in locations facing elevated exposure to flooding, extreme heat, wildfire, wind, and drought. As trillions of dollars flow into digital infrastructure to support cloud computing and artificial intelligence, the analysis suggests climate risk is becoming a key determinant of which markets can deliver durable returns.

Global data center capacity has expanded rapidly over the past decade and is expected to nearly double again by 2030. Yet while investors have traditionally focused on power availability, connectivity, land access, and demand growth, climate risk remains largely absent from many underwriting and valuation frameworks despite its direct influence on uptime, operating costs, insurance availability, and infrastructure reliability.

Dr. Jeremy Porter, Chief Economist at First Street, stated that location determines a large share of operational costs over 20 to 30 years, with climate playing a major role through cooling, water, and reliability factors. He noted that most valuations still focus on growth and treat climate as a secondary concern. Matthew Eby, Founder and CEO of First Street, added that most underwriting for real assets still uses historical data, but the climate is no longer behaving as the historical record would predict. He emphasized that as heat, drought, and water stress increase, outdated models do not offer a complete view of risk, and investors who incorporate these factors into underwriting and capital allocation decisions will be better positioned to identify resilient markets and avoid mispriced risk.

First Street launched the First Street Enterprise Suite in December 2024, a global software platform that transforms climate risk models into actionable financial signals for decision-makers worldwide.