While record temperatures are stressing a variety of commercial buildings, industrial properties face an exceptionally tough challenge.

Factories and shipping centers are among the largest property types, making them more costly to cool and heat. While users of industrial buildings already consume more power than tenants of other property types, an emerging group is even hungrier for power: data centers, buildings housing hundreds or thousands of computer servers, especially those that handle bitcoin mining and artificial intelligence applications.

Architects and engineers are being forced to get creative with designs for industrial buildings to handle the confluence of record-high temperatures and customers' seemingly insatiable appetite for electric power. Meanwhile, utilities are upgrading facilities to improve efficiency while letting data center operators know they can’t meet their every need.

The largest data center developers “used to ask for big amounts of power 24-7,” Aaron Melda, senior vice president of transmission and power supply at the Tennessee Valley Authority, told CoStar News. “As we’ve worked with them, we’ve told them that level of consumption doesn’t meet our mission. We’ve gotten them to cooperate with us.”

The surge in power demand from data centers comes as temperatures are rising. July was the hottest month during the 175 years the National Oceanic and Atmospheric Administration has kept records on temperature.

Extreme heat creates problems for commercial properties, according to a September 2023 report by Transwestern. Cyclical expansion and contraction caused by extreme temperatures can cause building cracks that allow moisture to creep in, which can lead to mold. High temperatures can also warp roofing materials and weaken sealants, while asphalt pavement cracks in extreme heat, leading to potential foundation damage.

Changes are underway across the property industry to deal with heat, from design changes in buildings such as hotels to shifting the way insurers go about covering single-family houses.

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Buildings need to be cooled to maintain structural soundness and the health of the workers inside. That’s a more difficult task for large industrial properties.

Historically, industrial properties were not designed to be cooled because of the high costs of air conditioning large indoor spaces, said Erica Godun, an architect and director of sustainability at Ware Malcomb who specializes in industrial design. But some developers decided that cooling industrial properties could be used as a worker-recruitment tool.

IRE Development wanted its four-building industrial project in Calexico, California, to set a new standard for sustainable construction to differentiate it from competing properties, Godun said. Ware Malcomb included extra insulation to the facility that "works well in the desert, where this is located, since the weather is cool at night,” Godun told CoStar News.

But not all industrial properties are being renovated in response to rising temperatures, and some industrial developers are building new facilities without improved cooling systems, Godun said. That's partly because the property industry has historically not considered it worth the cost to cool industrial buildings.

"The goal has been to build as inexpensively as possible," Godun said.

But some states have considered new rules, and California this year required any building "when employees are present" to have a temperature of 82 degrees or less, according to the California Labor & Employment Law Blog.

Calexico Gateway Center is also designed to use less water, and it has a reflective roof, energy-efficient building envelopes and energy-efficient lighting. It’s estimated the complex will use about 40% less energy than a comparable industrial property, according to Ware Malcomb. The first phase is set to open this year.

Ware Malcomb’s designs deploy rigid insulation products, primarily in a building’s roof, with R-30 ratings. The higher an R rating, the better an insulation’s quality. Roof insulation gets top priority with an industrial building, and Godun said the firm sometimes will supplement roof insulation with wall insulation, typically with a product that carries an R-19 rating.

Another architect who specializes in industrial work, Edward Eichten at Leo A. Daly, said he uses insulated metal panels that are efficient to assemble on a construction site and have good energy ratings.

“The varied thickness” of insulated metal panels “gives us flexibility in design,” Eichten told CoStar News.

Insulating an industrial building also encourages tenants to move in more quickly and allows landlords to charge higher rents, Godun said.

“It depends on the company and the ones that are trying to be more progressive and are focused on employee retention, cooling the property is a really big deal,” she said.

Greenery on a roof can also be used to help cool industrial buildings since it absorbs heat better than solid metal, Godun said. But a more common tactic for industrial buildings is topping roofs with solar panels. Ware Malcomb designed an industrial facility near Colorado Springs, Colorado, for beer distributor Eagle Rock with solar panels on the roof.

Godun has designed some industrial properties that can be easily equipped with solar panels at a later date if the developer/client isn’t ready to use solar during initial operations.

“If you get a new tenant later who wants solar, it’s harder and more expensive to equip an industrial building with solar panels after the fact,” she said.

Even with improved insulation, large air fans, solar panels and other techniques, industrial facilities still consume huge quantities of power.

Utilities that supply electricity are attempting to make their own operations more efficient because rising temperatures raise prices not only for commercial customers but for homeowners, who form the largest group of utility customers.

“Our mission is to improve the standard of living for the people who live here,” TVA’s Melda said. “Power reliability for the 10 million people we serve has to be our top priority.”

TVA serves all or parts of seven states in the Southeast, where humidity combined with high temperatures place an extra strain on power demands. Like the rest of the world, TVA’s service area has gotten hotter. TVA generated at least 28,000 kilowatts of power on 13 days in June, one of its highest-ever monthly totals.

The federally owned utility realized that it needed to manage its various sources of electric power more efficiently, including hydroelectric power generated by dams, nuclear, coal, natural gas and renewables.

TVA is developing a $300 million operations center in Georgetown, Tennessee, that executives said will give the utility better insight into its own operations. The new control center will be an upgrade over TVA’s existing facility in Chattanooga because it will use newer technology and have more fiber-optic cable connections to all the utility’s power plants, Melda said.

The system operations center “will give us increased visibility and predictability in how much power is being consumed,” Melda said. “We’ll be able to predict the weather better and plan better for possible outages.”

Some utilities have legal authority to cut off power to customers who haven’t paid their electric bills. Virginia recently approved a law that forbids such disconnects when the temperature exceeds 92 degrees, with supporters saying it risks lives if power is turned off during heat waves.

Data centers are one of the largest users of electric power, and they’re on the verge of using more. They now consume 1% to 2% of power worldwide, according to a recent Goldman Sachs report, and that's expected to rise to 3% to 4% by 2030. In the United States alone, data centers could use up to 9% of total electricity by 2030, according to the Electric Power Research Institute.

“This increased demand will help drive the kind of electricity growth that hasn’t been seen in a generation,” Goldman Sachs said.

AI is the main driver behind the forecast. A single query using the AI application ChatGPT requires 2.9 watt-hours of electricity compared to 0.3 watt-hours for a single Google search, according to the International Energy Agency.

That extra power drives up the temperature in the computer servers inside a data center. To keep the machines as cool as needed so they can operate, architects and engineers are exploring ways to make data centers more energy-efficient, said Jackson Metcalf, an architect at Gensler who works on critical facilities.

“Temperature fluctuations cause inefficiency, so we want data centers to be hermetically sealed” with insulation and no gaps in the building’s envelope, Metcalf told CoStar News.

Many data centers need to be located near users because it’s cheaper and more effective to transmit data over shorter distances. That’s why some data centers are located in hot climates like Atlanta, Dallas-Fort Worth and Phoenix.

“In an ideal world, we would build every data center in Nordic countries and rely on the outside air all year long” to cool the facilities, Metcalf said. “But the reality is we need the data near the consumers.”

The new breed of data centers that process AI applications or handle bitcoin mining — the computing process that’s essential for the management of digital currencies — don’t always need to be located near consumers, however.

That’s why some developers of data centers are looking to northern regions for new projects. North Dakota fits the bill because of its colder climate and because the state produces more electric power than its citizens consume. About 90% of the oil produced in North Dakota and 82% of the state’s natural gas is exported outside the state. The Bakken Formation in western North Dakota is a center of oil-fracking production.

Applied Digital is developing a 342,000-square-foot data center in Ellendale for AI applications and a smaller facility in Jamestown. Near Williston, the company Atlas Power is planning to build a $1.9 billion data center for bitcoin mining. And, near the northeastern North Dakota town of Nekoma, the bitcoin miner Bitzero Blockchain wants to develop a data center on the site of a decommissioned Cold War-era military installation.

Some of the largest users of data centers are also expanding their use of renewable energy to limit their carbon emissions amid excessive heat. Google recently said it plans to spend more than $1 billion this year on its data centers in Texas and signed agreements to use solar energy for some of the facilities.

It’s a struggle that will remain at the forefront, according to architects and utility company executives. Architects will need to keep exploring ways to address the impact of heat on industrial buildings, and developers will need to accept that the extra costs associated with the changes are necessary.

“Every year, we are continually having the hottest summer on record,” Godun said. "It's not looking like the blip we thought it might be.”