North America's Data Center Boom Shifts Location and Strategy

Data center construction in North America is expanding rapidly, with most new builds occurring outside traditional markets. This seismic shift is reconfiguring the landscape of the continent's digital infrastructure. According to a JLL report, Texas is projected to become the world's largest data center market, potentially surpassing Virginia, which has historically dominated the sector.

Approximately 64% of the 35-gigawatt data center construction pipeline is located in non-mature markets, beyond historically dominant areas like Virginia.

Record-Low Vacancy Signals Relentless Demand

Data center vacancy rates remained at a historic low of 1% for two consecutive years, as of the end of 2025. This persistent scarcity underscores the intense demand driving the market. Andy Cvengros, executive managing director and co-lead of U.S. data center markets at JLL, stated, "The sector has seen significant acceleration. Sustained record-low vacancy, combined with high pre-commitment rates for new construction by investment-grade tenants, indicates continued strong demand."

JLL reports that 92% of currently under-construction capacity is pre-committed, suggesting low vacancy rates could persist until at least 2030.

Demand is primarily driven by hyperscalers and artificial intelligence, with these major players pouring significant capital into the sector. The top five hyperscalers have allocated an staggering $710 billion in planned capital expenditures for infrastructure development in 2026. Lenders provided a record $75 billion in total financing for the sector last year, further fueling expansion.

Nuveen's Strategy: Build-and-Sell Amidst Uncertainty

In response to market dynamics, Nuveen, a global real estate development firm, is employing a build-and-sell model in the data center sector. This strategy aims to capitalize on current strong demand while simultaneously mitigating potential long-term risks.

Chad Phillips, global head of Nuveen Real Estate, commented that "significant demand is anticipated for the next five years, suggesting an oversupply situation is unlikely." He further noted that the rapid evolution within the sector makes the long term less predictable, influencing Nuveen's focus on shorter-term builds and sales.

Power Constraints: The Major Hurdle for Development

Despite robust demand and investment, significant risks exist regarding infrastructure constraints, particularly power availability. The immense energy requirements of modern data centers present a substantial challenge to the pace of construction.

Grid connection timelines average four years or more, requiring major tenants to secure capacity well in advance.

This critical constraint is a key factor driving expansion into new markets with greater power resources and less congested grids. Andrew Batson, global head of data center research at JLL, mentioned that some companies are considering onsite power generation to reduce risk. However, he added that most operators ultimately prefer long-term grid connectivity due to its reliability and scale.