Water-Cooled Air Conditioning: How It Works and When to Use It

Water-cooled air conditioning gets rid of the heat it removes from a building into water instead of outside air. The refrigerant passes its heat to a water loop through a heat exchanger, and the loop carries it away to a cooling tower, a dry cooler, the ground or another part of the building. It suits larger commercial buildings, especially city blocks with a building water loop, where plant has to sit indoors.

This guide explains how water-cooled systems work, the main types, where they make sense compared with standard air-cooled units, and the extra duties that come with a cooling tower.

At a glance

	Water-cooled	Air-cooled
Where the heat goes	Into a water loop, then to a cooling tower, dry cooler, the ground or other parts of the building	Straight to outside air through the outdoor unit's fan and coil
Where the plant sits	Usually indoors, in a plant room or on each floor	Outside, on a roof, wall or ground
Best for	Larger buildings, high-rise and city sites with a building water loop	Most homes, shops, offices and smaller buildings
Heat recovery	Strong, because every unit shares one water loop	Possible within a heat recovery system
Extra work	Water treatment, pumps, and cooling tower duties if one is used	Keeping the outdoor unit clean and clear

How a water-cooled air conditioner works

Every air conditioner moves heat. Indoors, the refrigerant absorbs heat from the room. In a standard air-cooled system, the outdoor unit then blows outside air over a coil to throw that heat away. In a water-cooled system, the condensing unit passes the heat from the refrigerant into water through a plate heat exchanger instead, and the warm water is pumped away.

The water then needs somewhere to lose its heat:

• A cooling tower, which cools the water by bringing it into direct contact with a stream of air, so some of it evaporates.
• A dry cooler, a closed coil with fans, where the water never touches the air.
• The ground or a water source, through boreholes or a closed loop. Daikin says its water-cooled VRV can use geothermal energy to heat and cool a building, because the ground temperature stays stable through the year.
• Another part of the building, when one area needs heating while another needs cooling.

Mitsubishi Electric sums up its City Multi WY water-cooled range as using water instead of air as the energy transfer medium, while keeping the same technology and flexibility as an air-sourced VRF system.

Types of water-cooled system

• Water-cooled VRF. Condensing units sit indoors on a shared water loop and serve many indoor units, as with Daikin's water-cooled VRV and Mitsubishi Electric's City Multi WY and WR2 ranges. Our guide to VRF air conditioning covers how VRF works.
• Water-cooled chillers. These cool water for the whole building, which is then piped to fan coil units or air handlers.
• Water-cooled packaged and split units. Smaller units connected to a building's condenser water system, common in older city office blocks.

Why choose a water-cooled system

• No outdoor units. Daikin's water-cooled VRV is engineered for indoor installation and is not visible from the street, which matters in conservation areas, listed buildings and high-rise blocks where roof or wall space is limited.
• Floor by floor plant. Daikin describes its units as light enough to stack and suited to a floor-by-floor layout, with a design that does not need extra ventilation or cooling in the plant room.
• Heat recovery. Daikin says that because all systems are linked by a single water loop, a water-cooled system achieves the maximum heat recovery potential. Heat taken out of a sunny south-facing office can warm a cooler north side.
• Stable performance. Water from a loop, the ground or a water source is usually at a steadier temperature than outside air, which helps on the hottest and coldest days.
• Using the building's existing loop. Many larger London buildings already have a condenser water system, so tenants can connect to it rather than find space for outdoor units.

The drawbacks

• More plant. Pumps, pipework, water treatment and a heat rejection device all add cost and maintenance.
• Water quality. The loop needs treating and monitoring to prevent scale, corrosion and fouling in the heat exchangers.
• Legionella. Cooling towers and evaporative condensers create the warm, aerosolised water in which legionella bacteria can spread, so they carry legal duties, set out below.
• Not for small sites. For a single office, shop or home, an air-cooled split or VRF system is simpler and cheaper.

Cooling towers: the legal duties

If a system rejects heat through a cooling tower or an evaporative condenser on non-domestic premises, the Notification of Cooling Towers and Evaporative Condensers Regulations 1992 require the person in control of the premises to notify the local authority in writing. The regulations define a cooling tower as a device that cools water by direct contact between the water and a stream of air.

The HSE's guidance on legionnaires' disease duties requires duty holders to assess and control the risk from water systems, and its HSG274 technical guidance covers evaporative cooling systems in detail. Closed-loop systems and dry coolers, where the water never meets the air, avoid the cooling tower duties, though the water still needs treating. Our guide to legionella and air conditioning explains the wider rules.

Maintaining a water-cooled system

• Water treatment and regular testing of the loop.
• Cleaning or flushing heat exchangers and strainers so flow stays up.
• Pump servicing, and checking flow switches and sensors.
• Cooling tower cleaning, disinfection and records, where one is used.
• The usual refrigeration checks on the condensing units, including F gas leak checks where the system's size requires them.

Flow problems are a common source of faults on water-cooled units, because a condensing unit that loses its water flow cannot reject heat and will stop on protection. Planned air conditioning maintenance keeps the water side and the refrigeration side checked together.

Installing water-cooled air conditioning in London

Many of London's office and residential towers run on a building condenser water loop, and fitting or replacing units on one needs care with flow rates, water quality, connections and the building's own plant. Our water-cooled air conditioning service covers installation, replacement and repairs on these systems across London.

Questions people ask about water-cooled air conditioning

How does a water-cooled air conditioner work?

It removes heat from the building in the same way as any air conditioner, but its condensing unit passes that heat into water through a heat exchanger instead of into outside air. The warm water then goes to a cooling tower, a dry cooler, the ground or another part of the building.

Is water-cooled air conditioning more efficient than air-cooled?

It can be in the right building, because water from a loop or the ground is at a steadier temperature than outside air, and a shared loop allows heat recovery between areas. For small buildings, the pumps, water treatment and extra plant usually make air-cooled the better choice.

Can you have water-cooled air conditioning at home?

It is rare in UK homes. Water-cooled systems suit larger buildings with a water loop. Flats in some London towers do run on the building's condenser water system, in which case the indoor unit connects to that loop.

Does water-cooled air conditioning use a lot of water?

A closed loop with a dry cooler uses very little, because the water is recirculated and never meets the air. A cooling tower loses water through evaporation and needs topping up, as well as water treatment.

Do water-cooled systems need an outdoor unit?

The condensing units usually sit indoors, which is one of the main reasons to choose them. The heat still has to go somewhere, so the building will have a cooling tower, a dry cooler, a ground loop or another way to reject it.

Do I need to register a cooling tower?

Yes, on non-domestic premises. The 1992 notification regulations require the person in control of the premises to notify the local authority in writing about any cooling tower or evaporative condenser.

The short version

Water-cooled air conditioning swaps the outdoor unit's fan and coil for a water loop. It shines in larger buildings, high-rise and city sites, where plant must sit indoors and heat can be shared between areas, but it brings water treatment, pumps and, with a cooling tower, legionella duties. For most smaller sites, air-cooled remains the simpler choice.

Last updated: 4 November 2026