This work studies how to minimize communication cost for placing Virtual Machines (VMs) in a modular data center. We consider a number of cooperative VMs implementing the same job, with known inter-VM communication patterns. The modular data center has a two-layer network structure, where computing pods constitute basic building blocks and are connected by a core network. At the core network layer, we design spectral clustering algorithms to partition VMs into computing pods, minimizing inter-pod communication cost. We then further apply an SDP relaxation approach to decide the VM placement within each computing pod, targeting both load balancing among physical servers and inter-server communication cost minimization. Extensive simulations are conducted to validate the efficacy of the proposed hierarchical VM placement scheme.