(TNND) — A new report from CBRE shows the North American data center market is setting records for growth amid soaring demand from artificial intelligence development, cloud computing, e-commerce and more.
CBRE, the world’s largest commercial real estate services and investment firm, said the market set records across nearly every major indicator last year.
Across the eight primary data center markets, users absorbed 2,497.6 megawatts in 2025, up 38% from 2024.
And the vacancy rate fell to a historic low of 1.4%, even with a 36% increase in total capacity.
That showed the speed at which users were moving into newly built space, according to CBRE.
Gordon Dolven, CBRE’s data center research director, said the data center market is an anomaly compared to other commercial real estate classes.
Rent prices in data centers were actually falling for years before a dramatic turnaround starting in 2021.
Since then, the average asking rental rate per kilowatt per month has jumped from about $120 to about $195.
“The pandemic period was the eureka moment for everyone to realize the utility of all of these data centers and for everyone to really lean into the technology advancements that these servers can provide you both personally and professionally,” Dolven said. “And so, you’ll see double-digit increases the past three years and then 6.5% increase last year.”
Dolven said the AI arms race is playing a role in the booming market for data centers, but the centers touch all aspects of modern digital life.
He said they do know that hyperscalers, the big tech companies like Google, are driving a majority of demand.
Mark Muro, a senior fellow at Brookings Metro who researches the digital economy, said the CBRE report suggests booming demand is taking place to meet forecasted growth.
Tech companies are hustling for position in the market, expecting big gains in the years to come.
But Muro warned AI uptake looks like it might be choppy.
Construction activity declined for the first time since 2020, CBRE said.
CBRE pointed the finger at permitting, zoning and power-procurement hurdles clogging the pipeline of new projects.
Muro and Daniel Goetzel, a technology strategy consultant and a former program lead for the National Science Foundation’s Regional Innovation Engines, recently published a report on how local communities across the country can take advantage of the data center boom to foster long-term economic benefits.
Goetzel said Tuesday that communities need to be aware of the fail rate of data center projects and understand what leverage they have when it comes to fast-tracking things like permitting in exchange for other community-specific benefits, including those that can boost the local workforce beyond the construction phase.
FILE – QTS, the global data center leader across North America and Europe, is building the Cedar Rapids, Iowa, data center campus, which marks the largest economic development in the city’s history, according to the company. (Photo courtesy of QTS)
Dolven said power is the main factor constraining the data center market from keeping up with demand.
Years ago, data center developers would build around a utility substation, because they weren’t using as much power, Dolven said.
“But when you start requesting 500 megawatts or 750 megawatts or a gigawatt of power, you need your own onsite substation,” he said. “And so, that requires these construction timelines to extend further and further out, because now it’s not just as simple as a 12-month construction project with you tapping into a substation that the utility built 20 years ago.”
Developers often now deal with extensive planning, permitting and zoning for electrical grid connectivity. And Dolven said big projects can take half a decade or longer to come to fruition.
But data center builders seemingly have more choices for where they build, with advancements in fiber connectivity no longer tethering them to urban areas near internet exchange points.
Last year, Northern Virginia reclaimed its spot as the national leader for data center capacity, boasting nearly three and a half times more data center capacity than all secondary U.S. data center markets combined.
Markets such as Nevada, Pennsylvania and Michigan are increasingly attractive due to abundant land, more flexible permitting environments and potentially easier access to power, according to CBRE.
Northern Virginia was among the aforementioned primary data center markets, along with Dallas-Fort Worth, Silicon Valley, Chicago, Phoenix, the New York metropolitan region, Atlanta, and a community outside Portland.
Central Washington, Toronto and Montreal are also among the 10 largest North American data center markets by inventory.
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