Texas is set to surpass Virginia as the world’s largest data market, according to a JLL report. The data center vacancy rate is projected to hold steady at 1% by the end of 2025 for the second consecutive year. Demand is spurred by hyperscalers and AI, although challenges in new development are dampening construction momentum.
Currently, 64% of the 35 gigawatt construction pipeline extends beyond traditional markets like Virginia. Almost all (92%) of the capacity in construction is pre-committed, minimizing the risk of oversupply for the next five years. The top five hyperscalers are projected to invest $710 billion in infrastructure by 2026. Lending in this sector reached a record $75 billion last year.
Nuveen is adopting a short-term, build-to-sell strategy to mitigate risks while addressing strong demand. However, infrastructure constraints remain a concern, especially regarding power supply, with grid connection timelines averaging over four years. Many companies are exploring on-site power solutions, though long-term grid connectivity is still preferred.
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