JLL: Hyperscale and AI Demand Push North American Data Centers Toward Industrial Scale

JLL’s North America Data Center Report Year-End 2025 makes a clear argument that the sector is no longer merely expanding but has shifted into a phase of industrial-scale acceleration driven by hyperscalers, AI platforms, and capital markets that increasingly treat digital infrastructure as core, bond-like collateral.

The report’s central thesis is straightforward. Structural demand has overwhelmed traditional real estate cycles. JLL supports that claim with a set of reinforcing signals:

• Vacancy remains pinned near zero.

• Most new supply is pre-leased years ahead.

• Rents continue to climb.

• Debt markets remain highly liquid.

• Investors are engineering new financial structures to sustain growth.

Author Andrew Batson notes that JLL’s Data Center Solutions team significantly expanded its methodology for this edition, incorporating substantially more hyperscale and owner-occupied capacity along with more than 40 additional markets. The subtitle — “The data center sector shifts into hyperdrive” — serves as an apt one-line summary of the report’s posture.

The methodological change is not cosmetic. By incorporating hyper-owned infrastructure, total market size increases, vacancy compresses, and historical time series shift accordingly. JLL is explicit that these revisions reflect improved visibility into the market rather than a change in underlying fundamentals; and, if anything, suggest prior reports understated the sector’s true scale.

The Market in Three Words: Tight, Pre-Leased, Relentless

The report's key highlights page serves as an executive brief for investors, offering a concise snapshot of market conditions that remain historically constrained.

Vacancy stands at just 1%, unchanged year over year, while 92% of capacity currently under construction is already pre-leased. At the same time, geographic diversification continues to accelerate, with 64% of new builds now occurring in so-called frontier markets. JLL also notes that Texas, when viewed as a unified market, could surpass Northern Virginia as the top data center market by 2030, even as capital availability and investor appetite remain notably strong.

Taken together, JLL argues these metrics undercut persistent bubble narratives and instead point to a market defined by durable structural demand. By year-end 2025, North America reached 39 GW of installed capacity, split almost evenly between 19 GW of leased colocation space and 20 GW of hyperscaler-owned inventory.

The pace of expansion remains striking. Nine gigawatts of new capacity were delivered in 2025 alone, with another 35 GW currently under construction, and the vast majority of that pipeline already spoken for.

While Northern Virginia, Dallas–Fort Worth, and the Pacific Northwest continue to anchor industry leadership, new and proposed development activity is now swelling rapidly across the Midwest and the South.

Bubble? What Bubble?

JLL directly addresses one of the loudest external critiques of the sector: vacancy risk. Despite record levels of new delivery, North American vacancy has held at just 1% for two consecutive years, underscoring the depth of current demand.

What little availability does exist tends to consist of small, fragmented blocks that are largely unsuitable for large-scale (particularly AI-scale) deployments. Most major tenants entering the market today are securing capacity for 2027–2028 delivery windows.

Crucially, with 92% of the development pipeline already precommitted, JLL suggests the risk of near-term oversupply remains limited.

The report does acknowledge pockets of risk tied to newer business models but estimates that exposure at less than 10% of future tenancy. In JLL’s view, the combination of roughly 99% sector occupancy and an investment-grade tenant base supports the case for continued structural durability.

Frontier Markets Are Taking Over

One of the report’s most consequential findings is geographic: of the 35 GW currently under construction in North America, fully 64% is located in frontier markets. Pressured by tightening constraints around land, water, and especially power in established hubs, the industry is increasingly pushing into territories that until recently were considered secondary.

Key beneficiaries include West Texas, Tennessee, Wisconsin, and Ohio:  markets where energy availability, land access, and permitting dynamics offer developers a clearer path to scale.

The underlying drivers are straightforward: power, land, and politics.

The report also documents a meaningful shift toward hyperscaler self-build. A decade ago, owner-occupied development represented roughly 20% of projects underway; today that figure has climbed to about 40%. At the same time, project scale continues to expand. JLL is now tracking more than ten campuses at or above the 1-gigawatt threshold, a level that would have been exceptional only a few years ago.

Against this backdrop, the report floats a provocative possibility: Texas, when treated as a unified market, could emerge as the world’s largest data center hub by 2030, supported by abundant energy resources and comparatively flexible development conditions.

Northern Virginia remains the industry’s center of gravity today. But the forward pipeline suggests momentum is steadily drifting southwest as developers confront mounting political friction, community pushback, and tightening resource constraints in legacy strongholds.

Demand Concentrates Around Hyperscalers and AI

Hyperscalers continue to dominate the demand landscape, accounting for roughly 65% of North American data center absorption, while enterprise verticals including finance, healthcare, and media have collectively slipped to about 27% as workloads continue migrating cloudward.

At the same time, two emerging buyer cohorts are beginning to register in a meaningful way. Neocloud providers were associated with roughly 1 GW of announced projects in 2025, often in nontraditional markets and with alternative development partners. Pure-play AI firms (most notably OpenAI and Anthropic) were linked to approximately 10 GW of project announcements, with deployments expected to roll out in phases.

The report’s most attention-grabbing signal, however, may be at the hyperscale level. JLL notes that the five largest hyperscalers have announced plans for approximately $710 billion in 2026 capital expenditures, a level theoretically sufficient to support about 35 GW of new or refreshed global capacity. The figure underscores how hyperscaler investment cycles now set the tempo not only for the data center sector, but increasingly for utilities, generation developers, and the broader digital infrastructure supply chain.

That demand pressure is arriving alongside continued pricing momentum. Average data center lease rates rose another 9% in 2025, bringing cumulative increases to roughly 60% since 2020. Larger capacity blocks - particularly those above 1 MW - saw the fastest growth, reflecting the premium attached to AI-scale deployments.

For tenants, the leasing environment remains firm. Annual escalators of 3% or more are now typical, concessions are limited, and renewal spreads remain meaningful. Notably, some frontier markets are now pricing near major metros, driven in part by perceived execution and delivery risk.

JLL nevertheless forecasts continued rent expansion, projecting a roughly 7% CAGR through 2030.

If vacancy is tight, power availability is tighter.

Grid interconnection timelines now average four years or longer across many regions. Developers able to bring flexibility to utility negotiations (through phased load strategies, bridge generation, or onsite power) are often able to accelerate their position in the queue.

Natural gas remains the dominant interim solution, with mobile turbines widely deployed to bridge near-term capacity gaps. Even so, most operators continue to view a permanent grid connection as the preferred long-term outcome.

At the same time, hyperscalers are increasingly pairing load growth with renewable procurement strategies. In parallel, battery energy storage systems (BESS) have surged into the multi-gigawatt range of announced deployments in 2025, evolving rapidly from optional reliability tools into core infrastructure components.

Capital Is Not the Constraint

JLL characterizes current financing conditions as an extraordinary vote of confidence in the sector. Data center debt origination surged from $27 billion in 2020 to $92 billion in 2025, underscoring the depth of institutional appetite. The year’s most eye-catching headline was the announced $40 billion consortium acquisition of Aligned Data Centers, expected to close in 2026 pending approvals.

While traditional asset sales totaled roughly $1.5 billion, the more important evolution is structural. Forward sales, joint ventures, and preferred equity structures are becoming increasingly common, highlighted by the $30 billion Blue Owl–Meta private capital joint venture. In effect, ownership models are becoming more programmable and capital stacks more engineered.

Securitization is also moving firmly into the mainstream. Asset-backed securities issuance exceeded $17 billion in 2025, nearly double the prior year, as lenders and investors grow more comfortable treating stabilized data center assets as durable income vehicles.

The appeal is straightforward: long lease terms, investment-grade tenants, and highly predictable cash flows. Increasingly, data center investments are being underwritten less like speculative real estate and more like infrastructure credit.

Stepping back across leasing fundamentals, geographic expansion, utility dynamics, and capital flows, JLL’s through-line is clear. Data centers have crossed the threshold from niche specialty into core global infrastructure. The tenant base includes some of the most profitable companies in the world. Capital providers are underwriting facilities with utility-like time horizons. And governments are actively competing to attract development.

Viewed holistically, the report advances five macro conclusions: demand appears structural rather than cyclical; most new supply is effectively pre-absorbed; growth is migrating toward energy-rich regions; pricing power remains with landlords; and capital markets show every sign of continuing to fund expansion.

If a limiting factor does emerge, JLL suggests it is far more likely to be power availability and permitting friction than a shortage of capital or customers.

A Sector Growing — and Being Re-Measured

One additional nuance in JLL’s latest edition deserves attention. By expanding its methodology to incorporate owner-occupied hyperscale capacity and more than 40 additional markets, the firm has effectively reset the statistical baseline for tracking the sector. Historical comparisons to prior reports should be viewed through this wider aperture as one that more fully captures the true scale of hyperscale-driven growth.

That scale is already approaching utility-level magnitude. JLL notes that the 35 GW currently under construction in North America alone is roughly equivalent to the annual electricity consumption of the United Kingdom or Italy; a striking illustration of how far the industry has moved beyond its traditional real estate framing.

At the same time, the report subtly underscores a new competitive reality. Developers that can bring flexible load profiles, bridge generation, or onsite solutions to utility negotiations are increasingly able to accelerate grid access. In an era of multi-year interconnection queues, power strategy is fast becoming one of the sector’s defining execution advantages.

At Data Center Frontier, we talk the industry talk and walk the industry walk. In that spirit, DCF Staff members may occasionally use AI tools to assist with content. Elements of this article were created with help from OpenAI's GPT5.

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