A measurement-based reduced-order heat transfer modeling framework is developed to optimize cooling costs of dynamic and virtualized data centers. The reduced-order model is based on a proper orthogonal decomposition-based model order reduction technique. For data center heat transfer modeling, the framework simulates air temperatures and CPU temperatures as a parametric response surface with different cooling infrastructure design variables as the input parameters. The parametric framework enables an efficient design optimization tool and is used to solve several important problems related to energy-efficient thermal design of data centers. The first of these problems is about determining optimal response time during emergencies such as power outages in data centers. To solve this problem, transient air temperatures are modeled with time as a parameter. This parametric prediction framework is useful as a near-real-time thermal prognostic tool. The second problem pertains to reducing temperature monitoring cost in data centers. To solve this problem, transient air temperatures are modeled with spatial location as the parameter. This parametric model improves spatial resolution of measured temperature data and thereby reduces sensor requisition for transient temperature monitoring in data centers. The third problem is related to determining optimal cooling set points in response to dynamically-evolving heat loads in a data center. To solve this problem, transient air temperatures are modeled with heat load and time as the parameters. This modeling framework is particularly suitable for life-cycle design of data center cooling infrastructure. The last problem is related to determining optimal cooling set points in response to dynamically-evolving computing workload in a virtualized data center. To solve this problem, transient CPU temperatures under a given computing load profile are modeled with cooling resource set-points as the parameters.