Are Developers Leaving Silicon Valley for Rural Markets?
Silicon Valley’s Shifting Data Center LandscapeFor decades, Silicon Valley was synonymous with the world’s technology infrastructure. From Menlo Park to Santa Clara, the region housed data centers supporting some of the biggest names in tech. But in 2025, the narrative is shifting. Developers are increasingly looking beyond the Bay Area to rural and secondary markets. Rising costs, power shortages, and evolving workload requirements are pushing data center growth into America’s heartland and remote corners where land is plentiful and power grids are less congested.In the past, companies were willing to pay a premium for proximity to their headquarters and engineering talent. Today, the drivers have changed: scalable land, affordable renewable energy, and favorable tax environments outweigh the need to build next door to corporate campuses. The shift reflects a broader decentralization of the digital economy, where compute resources are no longer tethered to tech industry capitals but distributed globally to follow energy, connectivity, and economics.This blog explores why developers are rethinking Silicon Valley, where they’re going instead, and what it means for the future of data center real estate.The Economics of Leaving Silicon ValleySoaring Real Estate PricesSilicon Valley’s commercial real estate costs remain among the highest in the world. Land zoned for industrial use near San Jose or Palo Alto can exceed $10 million per acre. In contrast, rural markets in Oregon, Iowa, or Tennessee offer land at a fraction of that price, often below $50,000 per acre.For developers building 50+ acre campuses, the math is simple: relocate to reduce upfront land costs by orders of magnitude. A hyperscale campus built on 100 acres in Silicon Valley could cost over $1 billion in land acquisition alone—before a single megawatt of power is deployed.Power Access and AffordabilityThe California grid, strained by renewable energy transitions and wildfire mitigation efforts, faces persistent challenges. In 2024 alone, data center power rates rose 15% YoY in Silicon Valley. Conversely, states like Nebraska, North Carolina, and Texas offer:Abundant wind and solar resources.Lower utility costs and industrial rates.Incentives for renewable energy integration.Developers can procure power in rural regions for as little as $0.04 to $0.06 per kWh—half the rates seen in the Bay Area. Power purchase agreements (PPAs) for wind and solar farms provide long-term price stability critical for hyperscale tenants.Permitting and Regulatory ComplexityCalifornia’s stringent environmental and permitting processes often delay projects by 12-24 months. Environmental impact assessments, water usage restrictions, and seismic safety codes add time and cost.In contrast, rural jurisdictions in Arizona, Utah, and Georgia offer streamlined permitting processes that enable construction to begin within 6 months of approval. Several states have introduced fast-track permitting zones specifically for data center development.Where Are Developers Going?The Pacific NorthwestOregon and Washington have long attracted data center investment, but rural areas like Umatilla County and Quincy are seeing new interest. Hydroelectric power and cooler climates make these locations cost-effective for hyperscale deployments. New fiber routes to the West Coast are improving connectivity.The Midwest and Great PlainsIowa, Nebraska, and North Dakota offer proximity to wind energy, favorable tax policies, and growing fiber networks. Meta, Microsoft, and Apple have already deployed major campuses in these states. Emerging markets in Kansas and South Dakota are seeing their first hyperscale campus announcements in 2025.The SoutheastNorthern Virginia remains the East Coast’s colocation hub, but secondary markets like Huntsville, Alabama, and Greenville, South Carolina, are emerging. These regions provide:Lower construction costs.Pro-business local governments.Access to regional fiber routes.Huntsville’s energy surplus and Greenville’s proximity to Atlanta make them attractive for both primary and disaster recovery deployments.The Role of Renewable Energy in Site SelectionRenewable energy availability is a key driver behind rural data center expansion. Hyperscalers and enterprises alike prioritize sites with access to solar, wind, and hydro generation. Data centers in:West Texas leverage some of the nation’s best wind resources.Eastern Oregon source power from the Bonneville Power Administration’s hydro grid.Georgia and North Carolina tap into expanding solar production.Developers increasingly pair on-site solar fields with battery energy storage systems to ensure uninterrupted operations and reduce carbon emissions. The ability to offer green power contracts is becoming a key differentiator in site selection.Not Just Hyperscalers: Colocation Providers Are Moving TooWholesale and retail colocation providers are following suit. Companies like QTS, STACK Infrastructure, and EdgeCore are developing in:Phoenix, Arizona: Fastest-growing Tier 1 market due to land availability.Columbus, Ohio: Attracting enterprise demand and cloud regions.Salt Lake City, Utah: Emerging as a disaster recovery hub for West Coast workloads.Colocation providers are increasingly marketing their rural locations as cost-effective alternatives to Northern Virginia and Silicon Valley, offering lower latency to regional metros and long-term sustainability.How AI Workloads Accelerate Rural ExpansionAI is reshaping site selection criteria. Model training requires:High-density compute clusters that benefit from liquid cooling.Stable power sources capable of supporting continuous, high-load operations.Proximity to renewable energy to offset massive energy consumption.AI workloads create spikes in demand that urban grids cannot reliably support. Rural sites provide the space and energy scale required for AI workloads that urban environments cannot support without significant infrastructure upgrades.NVIDIA’s DGX H100 systems, AMD’s MI300 series, and custom AI accelerators are driving rack densities beyond 80 kW—a level most Silicon Valley data halls cannot support without major retrofits.Impact on Silicon Valley: Decline or Evolution?While some see this shift as a decline, others frame it as an evolution. Silicon Valley remains a hub for:Corporate headquarters and RD labs.Innovation in chip design and cloud software.Smaller edge deployments serving local latency-sensitive workloads.Rather than hosting hyperscale data centers, Silicon Valley is repositioning itself as a consumption node within a broader, distributed compute ecosystem. Edge colocation providers like Equinix and Digital Realty maintain critical interconnection hubs in the Bay Area, ensuring the region remains a global network nexus.The Economic Ripple Effect in Rural MarketsData center projects are injecting billions into rural economies. Local impacts include:New high-paying jobs in construction, operations, and networking.Upgrades to power grids, roadways, and fiber networks.Tax revenues funding schools and community services.Communities that once depended on agriculture or manufacturing are now home to some of the world’s most advanced digital infrastructure. Economic development agencies are actively courting data center developers, offering tax incentives and workforce development grants.Challenges of Rural DevelopmentDespite the advantages, rural markets come with challenges:Workforce shortages require training programs and talent attraction.Fiber connectivity can be less dense, requiring new builds.Supply chain delays in sourcing specialized data center components.Developers are working with local governments and universities to address these gaps through:Public-private partnerships.Apprenticeship programs.Subsidized broadband initiatives.Looking Ahead: The Next Rural HotspotsAnalysts forecast future growth in:Southwest Kansas: Powered by wind and solar farms and incentivized by the Kansas Department of Commerce.Western Pennsylvania: Benefiting from proximity to East Coast markets and natural gas-powered generation.Northern Louisiana: Emerging as a Gulf Coast edge location with strong grid resilience.As AI demand grows, expect data center growth to follow renewable energy buildouts in areas previously untouched by tech development. Power availability will drive the next wave of site selection more than fiber proximity alone.A Distributed FutureThe wholesale colocation and hyperscale market is no longer confined to Silicon Valley or the major metros. In 2025, the digital economy’s backbone is increasingly rural. Developers are pursuing scalable, energy-rich, and cost-effective sites to meet the next decade of compute demand.Silicon Valley’s role has evolved—from the center of the data center universe to a key node in a much larger, distributed ecosystem. The question is no longer whether rural data centers will play a major role—it’s which regions will emerge as the next digital powerhouses.