Data centers stand out as the one real estate sector shielded from higher interest rates. Demand has been strong for the past 5 years, driven by three forces. First, the application level: every tap on a phone talks to a data center somewhere in the country. Second, cloud service providers growing their products and business lines, an enterprise and B2B wave. Third, the AI large language model buildout now underway across the country.
Supply and demand
Over the last 5 years the construction pipeline grew 15x, or 1,500%, on the supply side. Demand is just as strong. Vacancies sit at all-time lows, and 80% of the construction pipeline is already spoken for. Five years ago pre-leasing ran near 50% of what was under construction. That figure is now 80%, and the pipeline itself is 15 times larger.
Where they are getting built
The old model brought power to the site. Now the site must go to the power. New markets include Louisiana, Mississippi, Pennsylvania, Indiana, and Wisconsin - places that were not major data center markets 10 years ago. They became attractive for developers in 2026 because projects now sit on hundreds of acres and ask for hundreds of megawatts, sometimes gigawatts, of power.
The U.S. does not have a power generation problem. It has a transmission problem - moving the electrons. So site selectors hunt for areas that were once industrial or manufacturing hubs and lost work to offshoring. These communities still have electrical infrastructure unused for decades. A data center developer walking in can rescue a stranded substation in a town that once had an industrial boom.
Jobs and workforce
At the current build-out stage, construction workers and laborers are essential to getting the buildings up. Once running, each data center needs local operational talent: mechanics, electricians, technicians, and anyone working on mechanical, electrical, or plumbing systems, plus IT equipment staff. These blue collar jobs pay six-figure salaries, sometimes without a college degree. Because the talent pipeline is thin, developers and operators are building apprenticeships, training programs, and ties to local community colleges.
Ongoing management
Once operational, responsibilities split. A tenant leasing space in a collocation facility must keep its own servers running and handle hardware upgrades and maintenance. The landlord or operator maintains the whole power and cooling environment - all the mechanical, electrical, and plumbing equipment on site. Both require steady labor, opening large asset management opportunity down the line.
Biggest risks
The main risk is failing to deliver construction on time for the occupiers and demand. Grid interconnection timelines and power procurement keep slipping because of shortages in switch gear, transformers, breakers, generators, and heavy equipment. With all-time high pricing and all-time low vacancies, the near-term danger is a continued supply squeeze that pushes prices even higher for tenants. State-by-state pushback adds pressure: "not in my backyard" opposition, moratoriums, and regulatory fights expected to be a focus of the midterm elections.
Supply chain bottleneck
The tightest constraint is electrical equipment. Five or 10 years ago a data center might sit on 5 to 10 acres and request 5, 10, or 15 megawatts from the local utility. Now projects need hundreds of acres and hundreds of megawatts or gigawatts, often forcing developers to build their own substation on site rather than use one the utility already had running. Long lead times on switch gear, transformers, and breakers are pushing out completion dates for projects underway. Chips are advancing so fast that cooling systems struggle to keep pace, and memory and AI-driven inflation add to cost pressure. This has created a major opening for companies offering "bring your own power" - supplying electricity directly to the site.
The head of data research at CBRE (CBRE) gave this outlook. A separate segment planned to cover options activity in ServiceNow (NOW) after a price target hike.
