Data center sector enters hyperdrive as Texas prepares to dethrone Virginia as global leader

CHICAGO, Feb. 17, 2025 – The North America data center industry has reached an inflection point, with vacancy locked at a record-low 1% for the second consecutive year as the sector's extraordinary expansion fundamentally redraws the industry landscape. JLL’s new North America Data Center Report – Year-End 2025 reveals how 64% of the 35 GW construction pipeline now extends beyond traditional mature markets and, as a result, Texas is positioned to overtake Virginia as the world’s largest data center market by 2030.

The report marks a significant evolution in JLL’s market intelligence, implementing several enhancements including the expansion of hyperscale coverage and the addition of more than 40 frontier markets. JLL now tracks 39 GW of active capacity across North America, roughly half of which is leased and the other half owned by hyperscalers.

“The data center sector has officially entered hyperdrive,” said Andy Cvengros, Executive Managing Director, Co-Lead of U.S. Data Center Markets, JLL. “Record-low vacancy sustained over two consecutive years provides compelling evidence against bubble concerns, especially when nearly all our massive construction pipeline is already pre-committed by investment-grade tenants. This structural change is driven by hyperscale and AI demand and development headwinds that will likely keep vacancy near zero for the next several years.”

Available capacity remains limited to small, fragmented blocks, offering little flexibility for large-scale deployments. Most tenants securing space today are contracting for deliveries in 2027 or 2028, underscoring the depth and durability of forward demand. 

More than half of the extraordinary construction volume is in frontier markets, which JLL defines as the markets outside traditional mature hubs like Northern Virginia, Dallas-Fort Worth and Silicon Valley. Texas alone accounts for 6.5 GW of capacity under construction, supporting projections that the state could overtake Virginia as the largest global data center market by 2030.

Other beneficiaries of this geographic transformation include Tennessee, Wisconsin and Ohio, which, like Texas, are capitalizing on abundant energy resources, ample land availability and business-friendly operating environments. Project scale has expanded sharply, with JLL tracking more than 10 projects of 1 GW or larger currently under construction, a threshold that would have been eye-opening just a few years ago.

Supply scarcity continues to drive robust rent growth, with data center rents increasing 9% in 2025, which is in line with the five-year CAGR of 10% and reinforces the durability of pricing momentum. Rent growth was broad-based across all deal sizes, with listings greater than 1 MW commanding premium increases of 13%.

“With record low vacancy across North America, we are conservatively forecasting rent growth at a 7% CAGR through 2030,” said Andrew Batson, Global Head of Data Center Research, JLL. “With rents up 60% since 2020, landlords are capturing significant rent spreads on renewals while tenants continue to experience pronounced sticker shock on new leases. Most leases being executed today include annual escalations of 3% or more, with little to no concessions.”

Hyperscalers continue to set the pace for the industry, with the top five announcing $710 billion of planned 2026 CapEx, sufficient to support 35 GW of new or refreshed capacity globally. These commitments set both the direction and pace for the industry, but hyperscalers are not the only act in town. Pure-play AI companies were linked to roughly 10 GW of project announcements in 2025, with OpenAI and Anthropic leading the charge, while neocloud providers leased approximately 1 GW.

However, this unprecedented demand is colliding with significant infrastructure constraints. Grid connection timelines averaging four years or longer are fundamentally changing how hyperscalers and other major tenants approach data center development and deployment, forcing them to secure capacity years in advance and driving the expansion into frontier markets with more available power resources.

“Developers that collaborate with utilities on innovative solutions, such as flexible load profiles, phased power requirements or backup generation, can often expedite their grid connections,” said Matt Landek, Global Division President, Data Centers and Critical Environments at JLL. “The industry is rapidly adopting interim power strategies as companies work to close the gap between immediate capacity needs and grid infrastructure timelines. Major hyperscalers and leading operators have achieved carbon-neutral data center operations through comprehensive renewable energy procurement, demonstrating how sustainability mandates increasingly drive location decisions, facility design and operational strategies.”

The convergence of abundant debt capital, transformative AI demand and aggressive investment capital has positioned data centers as one of commercial real estate’s most dynamic sectors. Asset-backed security (ABS) volume exceeded $17 billion in 2025, nearly doubling from the previous year, while single-asset single-borrower (SASB) lending volume increased three-fold to over $11 billion.

“Data center debt markets demonstrated strong liquidity throughout 2025, both for deals under construction and deals reaching stabilization,” said Carl Beardsley, Senior Managing Director, Data Center Leader, JLL Capital Markets. “In addition to traditional financing solutions, the market experienced more complex transaction structures as the industry adapts to financing newer AI companies at scale.”

The market demonstrated increasing sophistication through complex transaction structures, highlighted by the $30 billion private capital joint venture between Blue Owl and Meta and the industry’s largest M&A announcement with the $40 billion Aligned Data Centers acquisition by a consortium of infrastructure investors and tech giants.

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