79% of Global Data Center Capacity Sits in Climate-Exposed Markets, First Street Finds

Seven in ten data centers worldwide operate in locations facing elevated exposure to at least one of five climate hazards — flooding, extreme heat, wildfire, wind, or drought — according to new research from climate risk analytics firm First Street published June 18. The finding puts a hard number on what infrastructure investors and cloud operators have largely treated as a future problem: the concentration of capacity in markets that are disproportionately exposed to physical climate stress.

Where the Risk Is Hiding

First Street's analysis points directly at the industry's structural irony. The world's largest data center markets — the ones that attracted the most capital and continue to grow fastest — are the same markets carrying the heaviest climate exposure. That is not a coincidence. Historically, those markets won on land costs, power access, fiber density, and tax incentives. Climate suitability was rarely a primary screen.

The result is that scale and risk have compounded in the same locations. Operators who built or leased into the dominant markets over the past decade now hold assets that First Street characterizes as facing elevated risk across multiple hazard categories simultaneously.

Five Hazards, One Balance Sheet Problem

The research identifies flooding, extreme heat, wildfire, wind damage, and drought as the risk vectors concentrating across major data center geographies. Each carries a different cost profile. Heat raises power draw for cooling, squeezing operating margins. Flooding and wind events threaten physical infrastructure and uptime guarantees. Drought constrains water-cooled facilities in ways that are difficult to engineer around quickly. Wildfire adds both direct asset risk and air-quality constraints that affect hardware longevity.

The bundling of these hazards matters commercially because it limits the degree to which operators can hedge within a single market. A campus exposed to extreme heat may also face drought, removing one of the standard mitigants — water-intensive cooling — from the options list.

What It Means for Capital Allocation

For the industry's buyers of long-duration infrastructure — hyperscalers signing decade-plus leases, REITs underwriting data center assets, and institutional investors pricing climate into discount rates — the First Street figures reframe site selection from an operational question into a material risk disclosure. If 79% of existing capacity sits in elevated-risk zones, the addressable market for climate-resilient capacity is, by implication, a fraction of what is currently operating.

That gap is a commercial opportunity for developers willing to build in lower-exposure geographies, but it also signals a repricing risk for assets already in place. Operators and their tenants will increasingly need to account for insurance costs, hardening capital expenditures, and potential uptime liabilities that did not appear in the original underwriting.

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