Data Center Availability Hits Historic Low Amid Surging Demand

The North American data center colocation market has reached an unprecedented juncture, with vacancy rates plummeting to a historic low of just 2.3 percent. This critical shortage, outlined in JLL’s “North America Data Center Report – Midyear 2025,” underscores the relentless demand for digital infrastructure, even as the sector’s inventory swells to a record 15.5 gigawatts (GW). The industry continues its explosive growth trajectory, yet it grapples with severe capacity constraints and complex energy sourcing challenges.

Northern Virginia maintains its steadfast position as North America’s largest data center market, boasting 5.6 GW of capacity—more than triple the size of Dallas-Fort Worth, which ranks second at 1.5 GW. Cloud providers and technology companies remain the dominant force in this market, collectively accounting for a staggering 65 percent of all leasing activity. Andy Cvengros, Executive Managing Director and Co-Lead of U.S. Data Center Markets at JLL, noted that the colocation market is enduring intense demand pressure within an increasingly stressful environment. Despite various market turbulences throughout the first half of the year, the sector delivered another exceptional performance.

Indeed, the market absorbed an impressive 2.2 GW in the first half of the year alone, with significant concentrations in Northern Virginia (647 megawatts, MW) and Dallas-Fort Worth (575 MW). Chicago (368 MW) and Austin/San Antonio (291 MW) also saw substantial leasing activity, positioning the sector to surpass 2024’s record absorption levels. Curt Holcomb, a Managing Director with JLL’s global Data Center Solutions practice team, described the activity in primary markets as extraordinary. In Dallas-Fort Worth, for instance, competition for limited capacity is unparalleled, with major cloud providers securing power reservations years in advance. The development pipeline there has expanded to over 1 GW under construction. Meanwhile, Austin has emerged as a genuine Tier 1 market, now holding nearly 921 MW of inventory and another 341 MW under construction, representing a remarkable 500 percent growth since 2020.

The construction pipeline across North America has ballooned to 7.8 GW, approximately ten times the volume from five years ago. Phoenix leads this development activity with 1.3 GW under construction, followed by Chicago (1.18 GW) and Atlanta (1.11 GW) outside of Northern Virginia. A significant concern for those seeking space is that 73 percent of all capacity currently under construction is already preleased—a consistent trend over the past two years, signaling that meaningful market relief remains years away. Matt Landek, Division President of U.S. Data Center Work Dynamics at JLL, emphasized that the traditional “build-it-and-they-will-come” model has been replaced by a “commit-before-it’s-built-or-you-won’t-get-in” reality. This shift is fundamentally reshaping corporate data center strategies, with enterprises now securing capacity 18 to 24 months, or even earlier, before their intended deployment dates, a stark contrast to the previous 6-12 month planning cycles.

While established markets continue to dominate, emerging markets are experiencing dramatic growth. Columbus, for example, has seen an astounding 1,800 percent growth since 2020, benefiting as power constraints in primary markets push new development elsewhere. This trend is amplified by rising commercial electricity rates, which have increased by nearly 30 percent since 2020, reaching an average of 9.7 cents per kilowatt-hour (kWh) in the first half of 2025. This cost pressure is driving development towards markets with lower power costs, such as Salt Lake City (5.7 cents/kWh) and Denver (6.4 cents/kWh). The average wait time for a grid connection across the U.S. now stands at four years, a significant hurdle that prevents rapid supply increases but, paradoxically, also helps prevent a market bubble from forming.

Andrew Batson, Head of U.S. Data Center Research at JLL, succinctly stated, “Power has become the new real estate.” With vacancy effectively at zero, virtually all absorption results from preleasing, with delivery times extending beyond 12 months. The market has maintained a remarkable 20 percent compound annual growth rate (CAGR) since 2017, a pace JLL’s development pipeline data suggests will continue through 2030, potentially expanding the colocation market to 42 GW of capacity.

The data center sector continues to solidify its position as one of the most favored real estate asset classes. Its market capitalization has grown by 161 percent since 2019, second only to industrial properties. This remarkable expansion is fueled by insatiable tenant demand, limited supply, and rising rents, creating a compelling investment thesis that consistently attracts new capital. Carl Beardsley, Senior Managing Director and Data Center Leader for JLL Capital Markets, reported a significant increase in capital deployed into data center projects in the first half of 2025 compared to the previous year. Developments with long-term leases are achieving up to 85 percent loan-to-cost from senior lenders at competitive spreads, while new entrants to the lending market are pushing for greater flexibility, higher leverage options, and increasingly creative financing structures.

The debt markets for data centers are also expanding significantly, with asset-backed security (ABS) and single-asset single-borrower (SASB) loan activity increasing for the third consecutive year. The first half of 2025 saw 14 ABS deals totaling $7.7 billion and four SASB deals totaling $5.7 billion, substantial increases from the same period in 2024. Despite this, asset-level investment sales remained relatively muted at $754 million across 23 transactions, with average cap rates holding steady around 6 percent, comparable to premium industrial and multi-housing properties.

Looking ahead, JLL anticipates that the supply-demand imbalance will persist for several years. While projects under construction are 73 percent preleased, an additional 31.6 GW of capacity is planned, but this supply will be phased in over five years or more. Northern Virginia leads all markets with 5.9 GW planned, followed by Phoenix (4.2 GW), Dallas-Fort Worth (3.9 GW), and Las Vegas/Reno (3.5 GW). Batson projects that North America could see $1 trillion in data center development between 2025 and 2030, with over 100 GW of colocation and hyperscale capacity potentially breaking ground or delivering within the next five years, not even accounting for the accelerating potential of quantum computing. The confluence of AI adoption, digital transformation initiatives, and cloud migration has created a perfect storm of demand that the industry simply cannot meet quickly enough, necessitating more crucial forward planning for enterprises seeking data center capacity.