Data center availability crisis deepens as vacancy hits historic low

CHICAGO, August 18, 2025 – The North America Data Center colocation market has reached a critical tipping point, with vacancy rates plummeting to an unprecedented 2.3% amid relentless demand for digital infrastructure. JLL’s North America Data Center Report – Midyear 2025 reveals how, as inventory grows to a record 15.5 GW, the sector continues its explosive growth trajectory while grappling with severe capacity constraints and energy sourcing challenges.

Northern Virginia maintains its position as North America’s the largest data center market. With 5.6 GW of capacity, it is more than triple the size of Dallas-Fort Worth, the second-largest market at 1.5 GW. The report also highlights how cloud providers and technology companies continue to dominate data center demand, accounting for 65% of all leasing activity.

“The colocation market is experiencing unprecedented demand pressure under an increasingly stressful environment,” said Andy Cvengros, Executive Managing Director, Co-Lead of U.S. Data Center Markets, JLL. “The first half of the year was riddled with disruptions, including the DeepSeek news at the beginning of the year and the potential impact of tariffs on demand and construction. Despite the turbulence, the sector posted another record-shattering performance.”

The market absorbed an impressive 2.2 GW in H1, with half of this activity concentrated in Northern Virginia (647 MW) and Dallas-Fort Worth (575 MW). Chicago (368 MW) and Austin/San Antonio (291 MW) also showed significant leasing activity, putting the sector on pace to exceed 2024’s record absorption levels.

“What we’re seeing across primary markets is nothing short of extraordinary,” said Curt Holcomb, Managing Director with JLL’s global Data Center Solutions practice team. “In Dallas-Fort Worth, for example, there is unparalleled competition for limited capacity. Major cloud providers are securing power reservations years in advance, and the development pipeline has expanded to over 1 GW under construction. Meanwhile, Austin has emerged as a genuine Tier 1 market with nearly 921 MW of inventory and another 341 MW under construction, representing a 500% growth since 2020.”

The construction pipeline has ballooned to 7.8 GW, approximately 10 times the volume from five years ago. Phoenix (1.3 GW) leads development activity followed by Chicago (1.18 GW) and Atlanta (1.11 GW) leading development activity outside Northern Virginia.

More concerning for those seeking space is that 73% of all capacity under construction is already preleased. High preleasing has remained consistent for the past two years, signaling meaningful market relief remains years away.

“The days of build-it-and-they-will-come are long gone,” said Matt Landek, Division President, U.S. Data Center Work Dynamics, who also leads JLL’s Data Center Project Development and Services. “What we’re seeing now is ‘commit-before-it’s-built-or-you-won’t-get-in.’ This is fundamentally changing how companies approach their data center strategies. Enterprise users who once planned 6 to 12 months in advance are now securing capacity and their facilities and operations teams 18 to 24 months before their intended deployment dates, sometimes even earlier.”

While established markets continue to dominate the landscape, emerging markets are experiencing dramatic growth. Columbus has seen an astounding 1,800% growth since 2020, while Austin/San Antonio has grown 500% from a smaller base during the same period. These emerging markets are benefiting as power constraints in primary markets push development elsewhere.

Commercial electricity rates have risen nearly 30% since 2020, reaching an average of 9.7 cents/kWh in H1 2025. This increasing cost pressure has driven development toward 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. is now four years. Power delays remain a significant hurdle in alleviating supply constraints. However, there is a silver lining, this obstacle is also preventing a bubble from forming in the sector.

“Power has become the new real estate,” said Andrew Batson, Head of U.S. Data Center Research at JLL. “With vacancy effectively at 0%, virtually all absorption is the result of preleasing with delivery times extending beyond 12 months. The market has been growing at a remarkable 20% CAGR since 2017, and our development pipeline data suggests this pace will continue through 2030, with the colocation market potentially expanding to 42 GW of capacity.”

The data center sector continues to solidify its position as one of the most favored real estate asset classes, with market capitalization growth of 161% since 2019, second only to industrial properties. This remarkable growth is driven by insatiable tenant demand, limited supply and rising rents, creating a compelling investment thesis that continues to attract new capital to the sector.

“There was a significant increase in the amount of capital deployed into data center projects under construction or reaching stabilization in the first half of 2025 compared to the previous year” said Carl Beardsley, Senior Managing Director, Data Center Leader, JLL Capital Markets. “We’re seeing developments with long-term leases achieving up to 85% loan-to-cost from senior lenders at competitive spreads, while new entrants to the lending market are pushing greater flexibility in terms, higher leverage options and increasingly creative structures at stabilization.”

The debt markets for data centers are experiencing significant expansion, 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. Meanwhile, asset-level investment sales remained relatively muted at $754 million across 23 transactions in H1 2025, with average cap rates holding steady around 6%, comparable to premium industrial and multi-housing properties.

Looking ahead, JLL anticipates the supply-demand imbalance to persist over the next several years. Projects already under construction are 73% preleased, and while an additional 31.6 GW of capacity is planned, that supply will be phased 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).

“North America could see $1 trillion of data center development between 2025 and 2030,” Batson added. “Based on our forecast, more than 100 GW of colocation and hyperscale capacity could break ground or deliver over the next five years. These projections do not include the potential upside of quantum computing, which we see as a sector accelerant over the next 5 to 10 years.”

The combination of AI adoption, digital transformation initiatives and cloud migration has created a perfect storm of demand that the industry simply cannot meet quickly enough, leading to the current supply crunch and making forward planning more crucial than ever for enterprises seeking data center capacity.

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