Texas is on the verge of surpassing Virginia as the world’s biggest data market, according to a report by JLL. This shift marks a significant change in the landscape of data centers. Traditionally, Virginia has held this title, but now a lot of new construction is happening in Texas and other emerging markets.
Data center vacancies are at a historic low of just 1%. This trend has continued for two years, indicating strong demand. Andy Cvengros, JLL’s executive managing director, noted that the sector is in “hyperdrive.” Most of the construction underway is already spoken for by major companies, ensuring that vacancy rates remain low.
Hyperscalers—companies that manage massive data operations—and the rise of artificial intelligence are driving this demand. JLL reports that the top five hyperscalers plan to invest a whopping $710 billion by 2026 to expand their infrastructure. Meanwhile, lenders are eager to get involved, with $75 billion in financing approved last year alone.
Chad Phillips from Nuveen Real Estate takes a short-term approach in this booming market. He believes there is no risk of oversupply in the next five years. However, he acknowledges that long-term predictions are less certain. The data center landscape is evolving quickly, prompting investors to focus on shorter-term projects.
A major challenge in data center development is securing power. The average timeline for grid connections can stretch to four years or more, which forces companies to plan well in advance. To mitigate this, many are considering onsite power generation, even though many still prefer long-term grid connectivity.
As this market evolves, keeping an eye on emerging trends is essential. The demand for data capacity doesn’t appear to be slowing down anytime soon. For more insights into the real estate market and data center development, visit JLL’s reports and newsletters.
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