New York City could play a significant role in the next wave of data center expansion, but its ability to capitalize on the opportunity may ultimately depend on how it addresses one critical constraint: power.
That was the key takeaway from a panel discussion at New York Build 2026, where industry experts explored the rapid rise of data center construction and how the trend is shaping up in one of the country’s most complex urban markets.
As demand for artificial intelligence infrastructure surges, data center development is accelerating nationwide. However, in New York, that momentum is colliding with an aging electrical grid, strict environmental policies and growing public scrutiny over resource-intensive facilities.
“The opportunity is there because the investment is there, the desire is there,” said Kelly Bacon, vice president and data center market lead at AECOM. “We’re at a point in time where if you don’t make these upgrades you’re going to miss out on one of the largest infrastructure booms we’ve seen in our lifetimes.”
Despite strong demand, panelists agreed that New York is unlikely to attract the massive hyperscale data centers seen in markets like Northern Virginia, often referred to as Data Center Alley.
“In New York City, we’re not going to have a 72-megawatt [data center],” said Amy Schaap, VDC engineer at Turner Construction. “Show me where?”
Space constraints, regulatory hurdles and infrastructure limitations make large-scale developments difficult within the city’s dense urban core. Still, industry leaders emphasized that this does not eliminate opportunity—it simply shifts the type of projects that make sense.
Rather than competing for massive hyperscale campuses, New York may find its niche in smaller, distributed data center models located closer to end users.
These include edge data centers, AI-specific facilities, retrofits of existing buildings and colocation sites where multiple tenants share infrastructure. Such projects typically require less space and can better align with the city’s physical and regulatory constraints.
“There’s going to be a little more of a shift back to owning your own premises,” said Rob LoBuono, principal at Gensler. “I think there’s going to be a shift toward owning your own AI model, and that’s going to be a much smaller building.”
“Really intrigued by the growth of edge data centers, and there’s a lot of discussion about vertical data centers in New York City proper,” Bacon added. “It’s still early days, but we’re starting to see paths towards that.”
Panelists also pointed to opportunities outside the city in regions like Albany and Buffalo, where existing infrastructure and available land could support more traditional data center development.
“There’s quite an opportunity in Western New York. There’s a lot of existing infrastructure that can repurpose in cities like Albany and Buffalo,” said Bacon. However, she noted, “there are complications. There are strong regulatory and environmental compliance issues that we have to deal with.”
Even as alternative development strategies emerge, the availability of power remains the most significant barrier to growth.
Data centers require enormous amounts of electricity, and New York’s current grid may struggle to support that demand. Panelists highlighted the stark contrast between existing industrial usage and what large-scale data centers require.
For example, the largest industrial user in the state consumes roughly 270 megawatts of power, while a single hyperscale data center can demand as much as 1,400 megawatts.
“Well, unfortunately, I’m not seeing as many solutions as I’m seeing problems these days,” Schaap said. “Data centers are obviously very, very resource intensive. They take a lot of water, they take a lot of power, and so the community impact of that is intense.”
To address these concerns, industry professionals are exploring solutions such as liquid cooling systems, more efficient building designs and even emerging technologies like small modular nuclear reactors.
At the same time, demand for supporting infrastructure—such as substations, battery storage and energy systems—is rising just as quickly as demand for the data centers themselves.
“We’re seeing the demand for battery and energy sources, systems and substations, as high, if not higher, than the data centers,” said Bacon.
As developers race to keep up with demand, speed-to-market has become a defining factor in data center construction.
“We have to preengineer, preplan, prefabricate quite a bit of our systems. In the building itself, we’re seeing a lot of prefabrication,” said LoBuono. “We’re actually seeing that as the only way right now to achieve the market speed that’s being driven in this economy for data centers.”
Prefabrication not only accelerates timelines but also helps address workforce challenges by allowing construction work to take place in locations with available labor and expertise.
“We’re building a lot of data centers, frankly, in the middle of nowhere. There’s nothing, there’s no community,” Schaap said. “But if we can locate the actual construction and the expertise where the people are, we’re able to develop workforce more, and we can do it safer and quicker, and maybe in a place where the construction costs are not quite as they are in certain markets.”
Additionally, the high-performance requirements of data centers introduce unique risks that demand precision in design and construction.
“For data centers, particularly building enclosure related things, it’s important to understand the risk,” said Dan Silva, senior consulting engineer at Simpson Gumpertz & Heger. “If you get a roof leak that shuts down the data center that has massive implications. That means we really have to make sure we’re designing and installing high performing building enclosure systems.”
.jpg)
New York’s data center future will likely depend on its ability to balance infrastructure limitations with innovation. While the city may not become a hub for hyperscale campuses, its dense population and proximity to users make it ideal for edge computing and specialized AI infrastructure.
Going forward, collaboration between policymakers, utilities and developers will be critical. Investments in grid modernization, clearer regulatory pathways and incentives for efficient technologies could help unlock new opportunities.
As the digital economy continues to expand, cities like New York that adapt to these evolving demands—rather than resist them—stand to benefit the most from the next generation of infrastructure growth.
Originally reported by Sebastian Obando, Reporter in Construction Dive.
