Power Shortage Threatens Data Center Expansion Across U.S.
The U.S. data center market is expanding faster than any other commercial real estate category, driven by artificial intelligence adoption. But electricity availability has become the sector's primary constraint, according to a market outlook from Newmark.
Roughly 280 data center projects are currently under construction across 32 states. Developers have pushed vacancy rates to just 2 percent-a historic low-as demand from hyperscale cloud providers and AI-focused companies continues to outpace supply.
The problem is scale. U.S. data centers currently consume about 60 gigawatts of electricity. Projects that are announced or under construction could add as much as 160 GW of new demand if fully built, representing nearly 20 percent of current U.S. peak electricity demand.
Delays in Grid Connections Slow Development
Utility interconnection delays, permitting challenges for new generation facilities, and equipment shortages are slowing capacity delivery. Developers are responding by investing in onsite power generation, including natural gas systems and behind-the-meter solutions.
The constraints are pushing development away from traditional data center hubs. Secondary and tertiary markets now account for more than 55 percent of the proposed development pipeline, where land, power, and permitting conditions are more favorable.
Local Opposition Is Rising
Community concerns are becoming a growing factor in project approvals. At least 25 proposed U.S. data center projects were canceled in 2025 following local opposition-four times the number canceled in 2024.
Water consumption, energy use, and land development impacts have become common points of contention in approval processes.
Despite these obstacles, demand for AI-related infrastructure is expected to remain strong. Developers continue pursuing solutions to address power and capacity constraints, but demand continues to grow faster than the infrastructure to support it.
Your membership also unlocks:
