Data center construction has become the hottest segment of commercial real estate development, with power-hungry facilities springing up across the United States to meet the exploding demand for artificial intelligence computing and cloud services.
An Unprecedented Building Boom
The United States had 5.4 gigawatts of data center capacity under construction at the end of June 2026, according to CBRE, a figure that has more than tripled since 2023. Northern Virginia remains the epicenter of the industry, accounting for 35% of total U.S. data center capacity, but new markets are emerging rapidly. Columbus, Ohio; Phoenix, Arizona; and Dallas, Texas have all attracted billions of dollars in data center investment over the past 18 months.
The primary driver is artificial intelligence. Training and running large language models requires enormous computing power, and the hyperscale cloud providers, Amazon Web Services, Microsoft Azure, and Google Cloud, are engaged in a capital expenditure arms race to build the infrastructure needed to serve enterprise AI demand. Combined, these three companies have committed more than $180 billion in data center capital expenditure for 2026 and 2027.
The Power Problem
The most significant constraint on data center expansion is electrical power. A single modern AI-optimized data center can consume 100 to 300 megawatts of electricity, equivalent to a small city. Grid operators across the country are struggling to accommodate the surge in demand, with some reporting that data center power requests have grown tenfold in two years.
“We are experiencing power demand growth that we haven’t seen in 40 years,” said Mark Surya, CEO of PJM Interconnection, the grid operator serving 13 eastern states. “The grid was not built for this kind of concentrated load growth, and the infrastructure upgrades needed will take years to complete.”
Nuclear Energy Re-Enters the Conversation
The power challenge has reignited interest in nuclear energy. Microsoft signed a 20-year power purchase agreement with Constellation Energy to restart the Three Mile Island Unit 1 reactor specifically to power its data centers. Amazon, Google, and Oracle have all made investments in small modular reactor technology. These commitments reflect a growing recognition that data center energy needs cannot be met through renewable sources alone given current battery storage limitations.
Investment Opportunities and Risks
For real estate investors, data centers offer attractive risk-adjusted returns. Average asking rents for wholesale data center space have risen 28% since 2024, reaching $150 to $200 per kilowatt per month in major markets. Cap rates have compressed to 5% to 6%, reflecting strong investor demand for the asset class.
However, the rapid pace of construction raises concentration risks. If AI demand growth falls short of projections, or if technological advances reduce computing requirements, some markets could face oversupply. Additionally, the long development timelines for new power infrastructure mean that projects announced today may face multi-year delays before they can begin operations.
The data center boom represents a generational infrastructure buildout that is reshaping energy markets, land use patterns, and local economies across the country. Its success or failure will have implications far beyond the technology sector.
