North America Data Center Colocation Market Report – Midyear 2025
CHICAGO, August 18, 2025 – The North America data center colocation market is at a critical juncture. Vacancy rates have dropped to a historic low of 2.3 percent, driven by relentless demand for digital infrastructure, according to JLL’s latest report. As total inventory climbs to a record 15.5 GW, the sector faces rapid growth alongside significant capacity and energy sourcing challenges.
Market Overview
Northern Virginia remains the dominant data center market in North America, with 5.6 GW of capacity—more than triple that of Dallas-Fort Worth, the second-largest market at 1.5 GW. Cloud providers and tech companies continue to drive demand, making up 65 percent of leasing activity.
Despite disruptions earlier this year, including geopolitical tensions and tariff concerns, the market absorbed 2.2 GW in the first half of 2025. Northern Virginia (647 MW) and Dallas-Fort Worth (575 MW) led leasing activity, with Chicago (368 MW) and Austin/San Antonio (291 MW) also seeing strong demand. This pace indicates the sector will likely exceed 2024’s record absorption levels.
Competitive Landscape
Competition for limited capacity is intense, especially in primary markets. In Dallas-Fort Worth, major cloud providers are securing power reservations years ahead, with over 1 GW under construction. Austin’s market has grown 500 percent since 2020, reaching 921 MW of inventory and 341 MW under construction, establishing it as a Tier 1 market.
The construction pipeline now stands at 7.8 GW—about 10 times the volume from five years ago. Phoenix leads with 1.3 GW under development, followed by Chicago (1.18 GW) and Atlanta (1.11 GW). Notably, 73 percent of this new capacity is already preleased. This consistent high preleasing suggests relief from supply constraints is still years away.
Companies are adapting their strategies, shifting from a reactive approach to securing capacity 18 to 24 months before deployment, rather than 6 to 12 months. The market’s “commit-before-it’s-built” reality demands longer-term planning from enterprises.
Emerging Markets
Emerging markets are gaining momentum as power constraints and rising electricity costs in primary markets push development elsewhere. Columbus has surged by 1,800 percent since 2020, while Austin/San Antonio grew 500 percent. Power costs have increased nearly 30 percent since 2020, averaging 9.7 cents/kWh in H1 2025.
Markets like Salt Lake City (5.7 cents/kWh) and Denver (6.4 cents/kWh) benefit from lower power costs, attracting new projects. However, grid connection wait times average four years nationwide, creating a bottleneck that limits supply growth. This delay is preventing an oversupply bubble from forming.
Investment Trends
Data centers continue to attract substantial investment, with market capitalization growing 161 percent since 2019—second only to industrial assets. Rising rents and constrained supply create a compelling investment environment.
Capital deployment into projects under construction or stabilization rose significantly in early 2025. Long-term leases enable developers to secure up to 85 percent loan-to-cost financing at competitive rates. New lending entrants are offering more flexible terms and higher leverage options.
The debt market is expanding, with asset-backed securities (ABS) and single-asset single-borrower (SASB) loans increasing for the third year. H1 2025 recorded 14 ABS deals totaling $7.7 billion and four SASB deals at $5.7 billion. Meanwhile, asset-level investment sales were modest at $754 million across 23 transactions, with cap rates steady near 6 percent, comparable to prime industrial and multifamily properties.
Future Outlook
The supply-demand imbalance is expected to continue for several years. Of the 7.8 GW under construction, 73 percent is preleased. Another 31.6 GW is planned but will be delivered over five or more years. Northern Virginia leads with 5.9 GW planned, followed by Phoenix (4.2 GW), Dallas-Fort Worth (3.9 GW), and Las Vegas/Reno (3.5 GW).
North America could see $1 trillion in data center development between 2025 and 2030. Over 100 GW of new colocation and hyperscale capacity may break ground or deliver in this period. These figures exclude potential growth from emerging technologies like quantum computing, which may accelerate demand further.
The current surge in demand is fueled by AI adoption, digital transformation, and cloud migration. This intense pressure has created a supply crunch, making early capacity planning essential for enterprises.
For professionals in real estate and construction, these trends highlight the importance of strategic investment and development in data center infrastructure to meet evolving market needs.
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