The North American data center sector has reached a “critical tipping point” with vacancy rates hitting record lows of 2.3% despite surging development, according to JLL’s midyear 2025 report. JLL, a global commercial real estate firm, forecasts up to $1 trillion in North American data center investment from 2025-2030, driven by AI demand and cloud expansion that’s forcing operators to completely rethink their strategies.
What you should know: Power access, not physical space, has become the primary bottleneck constraining data center growth across North America.
- Grid connections now take four years on average, while commercial electricity rates have risen nearly 30% since 2020 to 9.7 cents/kWh.
- Colocation vacancy dropped to just 2.3% across 15.5 GW of inventory, even as installed capacity continues growing.
- Cloud providers drove 65% of leasing activity in the first half of 2025, with 2.2 GW absorbed—matching 2024’s record pace.
The big picture: Developers are pivoting to secondary markets where power costs significantly less than traditional data center hubs.
- Salt Lake City offers electricity at 5.7 cents/kWh compared to higher rates in established markets, while Denver provides power at 6.4 cents/kWh.
- Columbus has expanded capacity by 1,800% since 2020, while Austin/San Antonio grew 500% to reach 900 MW live with 341 MW under construction.
- Northern Virginia still dominates with 5.6 GW—over three times Dallas-Fort Worth’s 1.5 GW—but faces increasing power constraints.
Market dynamics: The traditional “build-it-and-they-will-come” approach has become obsolete in today’s hypercompetitive environment.
- Despite a record 7.8 GW construction pipeline, 73% of projects are already preleased, leaving minimal short-term relief for new demand.
- Current planned development totals 31.6 GW, led by Northern Virginia (5.9 GW), Phoenix (4.2 GW), Dallas-Fort Worth (3.9 GW), and Las Vegas/Reno (3.5 GW).
- Data center asset values have grown 161% since 2019, reflecting the sector’s explosive growth trajectory.
What they’re saying: Industry executives emphasize that forward planning has become absolutely critical for securing capacity.
- “The days of build-it-and-they-will-come are long gone,” said Matt Landek, division president for JLL U.S. data center work dynamics. “Commit before it’s built — or you won’t get in.”
- “Power has become the new real estate,” said Andrew Batson, head of U.S. data center research at JLL, predicting continued 20% CAGR growth through 2030.
- “The combination of AI, digital transformation and cloud migration has created a perfect storm,” Batson added. “Forward planning is now absolutely critical.”
Looking ahead: JLL warns demand could accelerate further as AI and quantum computing adoption expand, potentially delivering more than 100 GW of new capacity through 2030.
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