In downtown Los Angeles, surrounded by businesses bustling with customers – shopping for clothes, searching for attorneys or even grabbing a bite to eat – stands One Wilshire.

The 30-story downtown office building, which once held conventional corporate resources like lawyers and telemarketers, has far fewer people cycling in and out of the building. But compared to its neighbors, it services the most customers: everyone. It’s among the largest data centers in the U.S., powering the likes of Amazon.com Inc., Netflix Inc. and Apple Inc. Over 300 strands of fiber run out of the building, creating a web of cables that connect these companies not only to homes in the U.S., but to those across the Pacific. Every TikTok video, artificial intelligence-generated viral deepfake and cloud-accessible family photo passes through One Wilshire before landing on screens big and small.

Data centers are home to the rows of multi-tiered server racks that house every bit and byte of online information that makes streaming movies, sending emails and uploading photos possible. Recently, due to the proliferation of artificial intelligence in everyday technology services like search engines, photo-editing platforms and document software has created an insatiable need to turn precious and expensive Los Angeles real estate – already stretched thin by the demand of multifamily housing units, mixed-use office and retail spaces – into more storage for online information.

“It’s one of the hottest sectors in real estate from the standpoint of everything driven by AI, the cloud and so on,” said Darren Eades, the Southern California technology and data center real estate expert at Jones Lang LaSalle Inc. “They have really increased the demand for the needed data centers all over the globe.”

A hot button issue

Southern California is no exception. According to a North America Data Center Report published by the real estate firm, the 2026 soccer World Cup hosted by the Federation Internationale de Football Association and the 2028 summer Olympics are adding extra pressure on the region’s infrastructure as it braces for the flood of tourists and media.

However, data centers have generated some controversy in California. They require electricity and water to power these whirring machines without overheating them, and the added demand brought on by generative AI requires even more energy to power the billions of computations it spits out. One ChatGPT query requires 10 times more electricity than a Google search, according to ChatGPT, causing an uptick in carbon dioxide emissions into the atmosphere.

Data centers caught some heat during the California wildfires and, given that California residents pay more for electricity than anyone else in the continental U.S. in part to prevent wildfires, California lawmakers have proposed a spate of bills to protect consumers from paying for energy that data centers gobble up.

“The fundamental question is: are we good selling our environmental laws out to Silicon Valley so it can run more data centers?” Jamie Court, president of Consumer Watchdog, said in a statement.

From a real estate standpoint, Southern California hasn’t exactly the premiere location for developers looking to build data centers. States like Virginia and Texas, with sprawling stretches of land, cheaper real estate value, inexpensive power cost and laxer data center regulations, have long been far more enticing for data center operators and real estate developers alike.

The JLL report found that Southern California has the most expensive co-location electricity rate in the U.S. at 21 cents per kilowatt, compared to the nationwide average of nearly 10 cents per kilowatt.

Other states boast sprawling, million-square-foot campuses of data centers that rival casinos in Las Vegas and can deploy anywhere from 250 to 500 megawatts. Developments in Southern California, which are usually multi-story buildings with small footprints, deploy around 50 megawatts. That still cost developers around $800 million to create and can create additional noise pollution on top of, well, pollution.

“They have a lot more data center demand. A lot of that has been driven by the cost of power and the cost of land and all the legislative red tape in the state of California to get data centers approved,” said Eades. “However, just due to the demand and the population that is in Southern California, the power costs are just kind of a rounding error. They still have to be here and they still want to be here.”

Finding a place

Cities have to evaluate how they want to allocate space, and where data centers will fit.

“A lot of communities were reluctant to do it because they wanted to have office and retail, and these live-work environments,” Eades said. “But fun and profitable are two different things. You look at the vacancy in office in downtown L.A. and across the L.A. basin. You can build a state-of-the-art data center in an old area or an area that has a vacant office building.”

In El Segundo, an airport-adjacent beach town surrounded by manufacturing firms, allocating real estate to data centers follows a set of standards that have been in place for decades. The upper-left quadrant is off-limits – that’s for the residents. But the two quadrants on the east side, which isn’t zoned for residential development, is ripe for data centers.

“Particularly when it comes to cooling and power, those are things that we are fortunate because of our traditionally industrial roots, we have a lot of power,” said Chris Pimentel, the mayor of El Segundo. “The coolant piece of it can be a bit tricky and we would want to know – if it was in the residential zone, this purely hypothetical – we would have questions about some of the impacts of that.”

El Segundo isn’t new to data centers. According to Pimentel, the Scattergood Generating Station at one point provided 10% of all electricity for Los Angeles County. The city has flirted with creative ways to efficiently cool its data centers – it once tried to ask a data center operator to run pipes under a neighboring municipal pool to capture waste heat and warm up the water.

“That seemed like a headache,” Pimentel admitted.

There might be other benefits of hosting data centers in buildings. A new development that is underway in Monterey Park is estimated to generate tax revenue 10 to 20 times greater than a traditional office building. Vernon, known as a manufacturing enclave, is also ramping up data-center development. It is home to a 250,000-square-foot, three-story building powering 50 megawatts of power.

“It’s a battle of tech bros versus California climate laws,” Court said.