The North America Data Center co-location market (where people hire data center space from another provider) has reached a tipping point. Vacancy rates have plummeted to an unprecedented 2.3% amid relentless demand for digital infrastructure according to JLL’s North America Data Center Report – Midyear 2025.
Despite inventory growing to a record 15.5 GW, severe capacity constraints and energy sourcing challenges have made space hard to come by. Those seeking to develop new data centers are struggling with the inability of utilities and equipment manufacturers to meet power needs promptly.
At the heart of the problem sits Northern Virginia’s Data Center Alley near Washington DC. It is North America’s largest data center market with 5.6 GW of capacity. That puts it more than triple the size of number two: Dallas-Fort Worth at 1.5 GW.
These key markets are overwhelmed with new demand from cloud providers, technology companies, and artificial intelligence (AI) applications.
“The co=location market is experiencing demand pressure under an increasingly stressful environment,” said Andy Cvengros, Executive Managing Director, Co-Lead of U.S. Data Center Markets, JLL.
“The first half of the year was riddled with disruptions, including the DeepSeek news at the beginning of the year and the potential impact of tariffs on demand and construction. Despite the turbulence, the sector posted another record-shattering performance.”
The market added 2 GW in the first half of 2025. Half of this activity is concentrated in Northern Virginia (647 MW) and Dallas-Fort Worth (575 MW). Chicago (368 MW) and Austin/San Antonio (291 MW) also showed significant leasing activity, putting the sector on pace to exceed 2024’s record levels.
“What we’re seeing across primary markets is nothing short of extraordinary,” said Curt Holcomb, Managing Director with JLL’s global Data Center Solutions practice team.
“In Dallas-Fort Worth, there is unparalleled competition for limited capacity. Major cloud providers are securing power reservations years in advance, and the development pipeline has expanded to over 1 GW under construction.
“Meanwhile, Austin has emerged as a Tier 1 market with nearly 921 MW of inventory and another 341 MW under construction, representing a 500% growth since 2020.”
The construction pipeline has ballooned to 7.8 GW, about 10 times the volume from five years ago. Phoenix (1.3 GW) leads development activity followed by Chicago (1.18 GW) and Atlanta (1.11 GW) leading development activity outside Northern Virginia.
More concerning for those seeking space is that 73% of all capacity under construction is already preleased. High preleasing has remained consistent for the past two years, signaling meaningful market relief remains years away.
“The days of build-it-and-they-will-come are long gone,” said Matt Landek, Division President, U.S. Data Center Work Dynamics, who also leads JLL’s Data Center Project Development and Services. “What we’re seeing now is ‘commit-before-it’s-built-or-you-won’t-get-in.’
“This is fundamentally changing how companies approach their data center strategies. Enterprise users who once planned 6 to 12 months in advance are now securing capacity (and their facilities and operations teams) 18 to 24 months before their intended deployment dates, sometimes even earlier.”
The Hunt for Affordable Power. While established markets continue to dominate the landscape, emerging markets are experiencing dramatic growth.
Columbus has seen an astounding 1,800% growth since 2020, while Austin/San Antonio has grown 500% from a smaller base during the same period. These emerging markets are benefiting as power constraints in primary markets push development elsewhere.
Commercial electricity rates have risen nearly 30% since 2020, reaching an average of 9.7 cents/kWh in 2025. This increasing cost pressure has driven development toward markets with lower power costs such as Salt Lake City (5.7 cents/kWh) and Denver (6.4 cents/kWh).
The average wait time for a grid connection across the U.S. is now four years. Power delays remain a significant hurdle in alleviating supply constraints.
“Power has become the new real estate,” said Andrew Batson, Head of U.S. Data Center Research at JLL. “The market has been growing 20% per year since 2017, and our development pipeline data suggests this pace will continue through 2030, with the co-location market potentially expanding to 42 GW of capacity.”
Charting the course to 2030. JLL expects the supply-demand imbalance to persist over the next several years. Projects already under construction are 73% preleased, and while an additional 31.6 GW of capacity is planned, that supply will be phased over five years or more.
Northern Virginia leads all markets with 5.9 GW planned, followed by Phoenix (4.2 GW), Dallas-Fort Worth (3.9 GW) and Las Vegas/Reno (3.5 GW).
“North America could see $1 trillion of data center development between 2025 and 2030,”Batson added. “Based on our forecast, more than 100 GW of co-location and hyperscale capacity could break ground or deliver over the next five years.
“These projections do not include the potential upside of quantum computing, which we see as a sector accelerant over the next 5 to 10 years.”
The combination of AI adoption, digital transformation initiatives and cloud migration has created a perfect storm of demand that the industry cannot meet quickly enough. It is up to power providers, power generation manufacturers, and utilities to rise to the challenge and alleviate the power supply crunch that threatens to curtail data center expansion.
