How will data centers impact nearby home values?

A new consideration

I received an email today from a client who bought a home about 12 years ago. She asked me about a topic I expect to hear a lot more about: How will proposed data centers near her home, if built, affect the value of her property? In replying to her, I realized the answer is much more complex than it may appear.

Potential concerns

My first response was that I expect her property value to decrease based solely on the fact that there is already evidence that people have a negative view of data centers. You don’t have to look far to find community residents saying “not in my backyard”. They cite concerns about

• Noise: Data centers run industrial HVAC units constantly and also have electrical transformers, creating a low grade but constant hum.
• Effects of water and electricity usage on residential availability: People worry about strain on water (especially during a drought) and electricity supply, as well as the potential for increased utility costs due to demand. Water pressure being reduced to a trickle is a specific concern.
• Potential environmental effects: The need for electricity could require new power plants and increased greenhouse gas emissions would occur if the electricity used is not from renewable sources. In addition to concern over having enough water, how the centers’ wastewater is treated has been questioned.
• Unsightliness: In addition to an industrial building and parking lot not being what most people consider scenic, there will be secuirty fencing and lighting, lots of cooling towers and large HVAC units.
• Construction issues: During construction of any data center, there will be traffic congestion, noise, dust/dirt (think air quality)

Additional local issues

In many areas in the US, the proposed sites are “in the middle of nowhere” and are expected to be large, single compounds. Interestingly, in more densely populated areas, like the greater Philadelphia area, the proposals are for several smaller facilities. Having multiple data centers suggests additional disruptions. Some people believe that, as a result, entire communities will shift from feeling mostly residential to mostly industrial/commercial. Additionally, they are not particularly attractive and many complain that, living in a more densely populated area, they will change the visual landscape of their neighborhoods. People expect fewer parks and trees and a more industrial look to their suburban neighborhoods.

Validity of the opposition

Supposedly, they don’t generate much sound beyond that of their cooling systems, so the argument of them being noisy may be off-base. Similarly, they create no air pollution, like many factories. However, the amount of water required to cool them is immense. Concerns over not only scarcity but potential pollution depending on how that water is recycled, could be quite real.

Not enough data

Ironically, the reason it’s so hard to know what the effect of living near a data center would be is that we don’t have enough DATA to make an accurate prediction. So, on the one hand, there are plenty of people who fear the worst (and, therefore, might expect their property values to drop), there may be others who take a wait-and-see approach. I was thinking about all of these different points and reminded myself that my task was to help this past client determine if her property value would drop.

The role of herd mentality

Then it occured to me that there’s another significant factor to take into account. For home owners worried that values will drop, they may not wait to find out; they may sell their homes in areas where data centers are being built (or even proposed) to get ahead of that decrease in value. If enough people take that route, they could inadvertently create the exact loss in value that they fear.

Here’s the scenario (extreme, I admit) that could play out: several current residents decide to sell before their properties lose value. As a result, lots of homes in that area go on the market. Anyone who might be considering a purchase in that area is probably already thinking that the data center proximity could negatively impact the value. Now, in addition, there’s a lot of supply, which means prices will go down. Scarcity increases value; oversupply decreases it.

With the collision of these two events, residents who were going to take the wait-and-see approach will see that their homes are already losing value. So, at that point, even if the data centers are never built, they would be wise to sell sooner rather that later. I liken it to the stock market crash of 1929–it was the fear (not the reality) of the banks running out of money that led to the stampede of people to pull their money out. The depression that followed was due more to what people were afraid would happen than anything that actually had happened. And their response to the fear caused the exact situation they were hoping to avoid.

Best course of action?

So, while, from a certain perspective, it seems wise to see what the effects of living near a data center actually are, before (potentially unnecessarily) sounding the alarm. On the other hand, it’s easier to suggest that option if it’s not your property value that could be adversely affected. As more of these centers are proposed and, assumedly, some built, we will obviously have more information on which to base decisons about their affect on home values. Again, though, I understand my client wanting to avoid waiting if that choice proves detrimental. What would you do?

If you are relocating to the Philadelphia/Main Line area, please go to my blog page and search for posts using the relocation tag. Contact me to discuss your Philadelphia area relocation! jen@jenniferlebow.com/610 308-5973