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The 2026 Guide

Data Center Water & Cooling

After power, water draws the most scrutiny. How much a data center uses depends on its cooling design: water-based, air-cooled, liquid or immersion.

By ·Passive Investments·
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On a 50 MW Powered Site, the Right Broker Can Make a $15 Million Difference

Powered land is one of the most valuable and competitive segments of commercial real estate, but how a property is marketed can dramatically impact its final sale price.

Consider a site with 50 MW of power:

At $300,000 per MW$15 million
At $600,000 per MW$30 million
Difference$15 million

Scale it to a site with 100 MW of power and the same pricing spread is $30 million versus $60 million — a $30 million difference in potential sale proceeds.

That’s why creating competition matters. A broker who understands the data center and energy markets can position a property in front of hyperscalers, data center operators, infrastructure investors, and energy developers — creating competitive tension among qualified buyers.

The goal isn’t simply to find a buyer. It’s to create a competitive process that maximizes the property’s value. When millions of dollars are at stake, the right marketing strategy and broker representation can make all the difference.

Per-MW figures are an illustrative pricing range, not a guaranteed valuation. See the pricing disclaimer below.


How Data Centers Stay Cool

Data Center Water & Cooling

After power, water is the resource that most often makes headlines and shapes community reaction. Data centers generate enormous heat, and how efficiently they remove it — and how much water that takes — depends entirely on the cooling design.

Why do data centers need cooling?

A data center is a building optimized to convert electricity into computation and to remove the resulting heat. Water carries heat far more effectively than air, so water-based cooling has historically been energy-efficient — but it consumes water, which has become a point of public concern and is pushing the industry toward lower-water designs.

What is the difference between air, liquid and immersion cooling?

Air-cooled (dry) designs reject heat to the atmosphere with fans and chillers, using little or no water but more electricity. Liquid cooling brings coolant directly to the chips (cold plates), handling the extreme heat of AI hardware and enabling much higher rack densities. Immersion cooling submerges servers in a non-conductive fluid, enabling the highest densities and excellent efficiency, with closed-loop systems using very little water. AI's rising rack density is driving rapid adoption of liquid and immersion.

Which data center cooling approach uses the least water?

Air-cooled (dry) systems and closed-loop immersion cooling use the least water, while evaporative cooling towers use the most water but less energy. Direct-to-chip liquid cooling sits in between on water and stays efficient at high density, which makes it the usual choice for AI and GPU halls. The right design depends on local water supply and rack density.

Approach Water use Energy use Best fit
Evaporative / cooling towers High Lower Water-rich regions, cost-sensitive cooling
Air-cooled (dry) Very low Higher Water-scarce regions, drought risk
Liquid (direct-to-chip) Low–moderate Efficient at density High-density AI/GPU halls
Immersion Very low (closed loop) Very efficient Extreme density, water-sensitive sites

What are PUE and WUE in a data center?

Two efficiency metrics matter. PUE (Power Usage Effectiveness) is total facility power divided by IT power — lower is better, with efficient facilities below 1.3. WUE (Water Usage Effectiveness) measures water consumed per unit of IT energy, in liters per kWh — the water analog of PUE. Operators increasingly track and disclose both, and low-water designs aim to push WUE toward zero.

Why are communities concerned about data center water use?

Traditional evaporative cooling can consume large volumes of water — a real concern in arid regions or during drought, where a large facility's demand can rival a sizeable population's. Developers increasingly address it head-on with reclaimed or non-potable water, closed-loop or dry cooling, and transparency about consumption. A site's water rights and the local utility's capacity are genuine site-selection factors — and a place where doing right by the community and doing right by the project align. Water-rich regions like the TVA footprint hold an advantage here.

Frequently Asked Questions about Data Center Water and Cooling

How much water does a data center use?
It depends entirely on cooling design. Evaporative cooling can use large volumes; air-cooled (dry) designs use little to none but consume more energy; closed-loop liquid and immersion cooling can sharply reduce water use. Large evaporatively cooled facilities can consume water comparable to a sizeable population.
Why do data centers use water?
To remove the substantial heat generated by computing equipment efficiently. Water carries heat far more effectively than air, so water-based cooling has historically been energy-efficient. The trade-off is water consumption, which has become a public concern, pushing the industry toward lower-water designs.
What is the difference between air, liquid, and immersion cooling?
Air cooling uses fans and chillers to cool room air (low water, higher energy). Liquid cooling brings coolant directly to the chips for far better heat removal at high density. Immersion cooling submerges servers in non-conductive fluid for the highest density and efficiency. AI hardware is driving adoption of liquid and immersion.
Can data centers be built without using much water?
Yes. Air-cooled (dry) designs, closed-loop liquid cooling, and immersion cooling can dramatically cut or nearly eliminate water consumption, often by trading some energy efficiency for water savings. Using reclaimed or non-potable water is another common strategy, especially in water-scarce regions.
Why is data center water use controversial?
Because a large facility's water demand can rival a sizeable community's, raising concerns about capacity, drought resilience, and fairness to other users — especially in arid regions. Developers address it with non-potable or reclaimed water, closed-loop or dry cooling, and transparency about consumption.
Is water or power the bigger constraint for a data center site?
Power, almost always. Available power is capacity that is energized or contracted today — documented in a signed service agreement or a utility will-serve letter with a stated megawatt figure and date. Requested power is capacity someone has applied for or is studying in a queue; it is a possibility, not an asset, until the utility commits to it in writing. Water shapes the cooling design and community acceptance; power decides whether the project can be built.
What water documentation do data center buyers want?
A will-serve or capacity letter from the water utility stating daily volume, any withdrawal permit or water-right record for surface or well water, the availability of reclaimed or non-potable supply, and the wastewater or discharge path. Buyers also want to know whether local rules cap industrial water use.
How long does it take to secure water service for a data center?
It varies by source. Connecting to existing municipal capacity can be quick; new mains, reclaimed-water agreements or state withdrawal permits can take much longer. Buyers line water up so it is never the item that delays an energized site.
Does the cooling design change how much land a data center needs?
Yes. Evaporative cooling towers, dry coolers, chillers and water storage all take ground, and air-cooled designs usually need more equipment yard than water-cooled ones. Buyers size buildable acreage around the cooling plant as well as the halls — this site's working rule is roughly 0.5 to 1.5 acres per MW of IT load.
Do local zoning or permits restrict data center water use?
Increasingly. Some jurisdictions add water-use conditions to data center approvals or require reclaimed water, and state agencies regulate large withdrawals. Confirm both the zoning conditions and the water permits before marketing a site as water-ready.
Does water availability change the price per MW a buyer will pay?
At the margin. Where water is scarce, buyers plan for air-cooled systems that use more electricity, which raises operating cost and can lower what they pay for land. Plentiful non-potable water can make a site more attractive to a wider set of operators.
How do buyers underwrite water risk on a data center site?
They model the cooling design the site can support, the water volume and cost it implies, the permit and community-acceptance risk, and the energy penalty of a low-water design. Efficiency metrics such as PUE and WUE are tracked in the model; industry-wide, average PUE has barely changed for six straight years according to Uptime Institute's 2025 survey.
Does a water-rich site still need fiber?
Yes. Water helps with cooling, but every data center needs diverse, high-capacity fiber to serve its users. A water-rich, power-ready site without a realistic fiber path will still be discounted.

Have water-rich land near power?

Water access can be a decisive advantage for a data center site. Carson Jones can help you assess it. Get a confidential site read or visit Passive Investments.

Educational information only — not legal, tax, engineering, or investment advice.

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Carson Jones

Carson Jones

Founder · Passive Investments · eXp Commercial

Carson Jones is the host of Carson's Corner: Commercial Real Estate, author of The Red Flag Playbook, a licensed commercial real estate advisor and business broker, and the founder of Passive Investments. With 18 years of experience as an entrepreneur and 12 years specializing in passive investing, Carson works with high-net-worth individuals, family offices, business owners, and sophisticated investors as a broker and principal.

Carson holds a BBA in Finance from Baylor University and his Tennessee commercial real estate license (#382989). He actively pursues acquisition and equity opportunities across the United States and abroad through a worldwide network of qualified buyers, family offices, institutional investors, and top-tier developers.

This article is for informational and educational purposes only and should not be considered tax, legal, accounting, or investment advice. Tax laws are complex and change frequently. Always consult your CPA, attorney, and financial advisor before making any financial, tax, or investment decisions. All investments and property ownership carry risk, including the potential loss of principal. Carson Jones, Passive Investments, and the author make no guarantees regarding the tax treatment, performance, or outcome of any specific investment strategy described in this article.

Pricing disclaimer. The $300,000–$600,000 per-MW figures used on this page are an illustrative pricing range, not a guaranteed valuation. Actual pricing depends heavily on confirmed power capacity, delivery timelines, utility costs, location, and development readiness.