Data Center Space Demand Surges Despite Record Capacity
North American data centers are on track to see investments reaching $1 trillion by 2030, even as vacancy rates hit an all-time low. According to a recent midyear report from commercial real estate firm JLL, overall vacancy across the continent has dropped to just 2.3%, despite inventory topping a record 15.5 gigawatts.
This trend highlights the intense competition among developers, tech giants, and power companies to secure space that meets the growing needs for cloud storage, artificial intelligence, and emerging technologies like quantum computing.
Early Commitment Becomes the Norm
With demand far outpacing supply, tenants are locking in data center space much earlier than before. The report shows 73% of under-construction capacity is already pre-leased, pushing tenants to commit 18 to 24 months ahead—up from the previous 6 to 12 months timeframe.
Matt Landek, head of JLL’s Data Center Project Development and Services, sums it up: “The days of build-it-and-they-will-come are long gone. Now, it’s commit-before-it’s-built-or-you-won’t-get-in.” This shift is reshaping how companies plan their data center strategies.
New Drivers and Market Adjustments
The AI sector is a major force behind this surge. For example, the Stargate project in West Texas secured $7.1 billion in funding from lenders including JPMorgan Chase to expand its data center capacity. Developers are also targeting locations near nuclear power facilities and other stable energy sources to meet power demands.
Unexpected changes in the market, such as the debut of China's DeepSeek with a lower-cost AI model, have sparked discussions on whether easier AI access will further increase storage needs.
Andy Cvengros, JLL’s executive managing director, points out that despite disruptions like tariff uncertainties and new market entrants, the data center sector continues to deliver record-breaking growth.
Power Availability: The Critical Bottleneck
One of the biggest constraints on new data center supply is access to power. Electricity costs have increased by 30% since 2020, and connecting new sites to the grid involves lengthy wait times. These factors have pushed some developers to explore markets beyond the largest hubs.
Andrew Batson, JLL’s head of U.S. data center research, notes that “Power has become the new real estate.” With about 100 gigawatts of capacity expected to break ground in the next five years, excluding potential quantum computing demand, power availability will continue to shape development.
Leading and Growing Markets
- Northern Virginia: The largest market with 5.6 gigawatts of capacity, nearly four times that of second-place Dallas-Fort Worth.
- Dallas-Fort Worth: Holds 1.5 gigawatts of capacity.
- Phoenix: Boasting 1.3 gigawatts with strong pipeline growth.
- Chicago: At 1.18 gigawatts.
- Atlanta: With 1.1 gigawatts and a doubling of total capacity since 2023, poised to double again by 2026.
Other rapidly growing markets include New Jersey, which is benefiting from competitive tax incentives, and Columbus, Ohio, which has seen an 1,800% increase in capacity since 2000. Austin/San Antonio and Las Vegas/Reno are also expanding quickly.
In Columbus alone, over 2,000 acres have been acquired recently to support data center development, with Amazon Web Services operating five data centers and planning a $10 billion investment boost in the state.
Implications for Real Estate and Construction Professionals
For those in real estate and construction, these trends underscore the need to anticipate longer project timelines and early tenant commitments. Securing sites with reliable power infrastructure will be critical. Understanding regional market dynamics and emerging hubs can position professionals to capitalize on this surge in data center demand.
Given the evolving technology drivers such as AI and quantum computing, staying informed about data center developments and investment flows will be essential for strategic planning and execution.
For professionals looking to deepen their knowledge on AI and its impact across industries, exploring targeted courses can be valuable. Resources like Complete AI Training’s latest AI courses offer practical insights into these technologies shaping data center demand.
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