America’s data center capacity just keeps growing. According to a recent report from the real estate services company JLL, the colocation data center market has doubled in size in the last four years.
The report, which covers the data center sector in the first half of 2024, paints a picture of a sector in flux: more demand, lower vacancy rates, and a grid that is holding up to the change, at least so far.
Data centers accounted for 3% of U.S. power in 2023, but JLL found that the share is projected to soar past 11% in the coming decade, even as demand from reshoring manufacturing and electrification also swells. (Some are skeptical of high projections like these.)
The arrival of artificial intelligence has been a key contributor to the changes, representing roughly 20% of new data center demand in the last year. However, JLL notes that confidentiality clauses make pinning down the precise share difficult.
While it was clear in early 2024 that demand was accelerating and construction was increasing to to meet it, capacity under construction has leveled off this year at 5.3 gigawatts. (That is the equivalent to the power consumption of the entire Tampa Bay region.) Planned developments, though, have nearly doubled to 22 GW in the first half of the year.
Today, inventory amounts to more than 12 GW, and vacancy rates have plunged to a record low of 3% — and are “trending toward 0%” despite starting the decade at 9.9%. Northern Virginia dominates the data center landscape, with more than 4.5 GW of existing capacity.
The report also noted that one of the biggest challenges for data center operators is finding and retaining employees, and that there is a need to expand the labor pool.
The impact on the grid
The report emphasizes that concerns about the impact of data center growth on the grid are mounting. That said, the concerns are more long-term.
“While some areas are experiencing power exhaustion, other regions continue to have power capacity for data center development,” the report clarified. “In aggregate, the U.S. power grid is not in danger of running out of capacity in the near-term.”
However, data center power loads are increasing; JLL found that new projects “regularly” require 100 megawatts, and some eclipse a gigawatt. And the lead times for connecting these new projects to the grid are increasing as well, prompting developers to turn to energy solutions like fuel cells or supplemental gas turbines.
“The ability for data centers to operate as a microgrid can accelerate the timeline for interconnection as the grid’s main limitation is a lack of resources to meet a few hundred hours of peak demand during the summer season,” the report said, adding that developers are also seeking out the secondary markets (such as Salt Lake City and the Las Vegas area) and rural areas where power is more readily available. “In some cases, hyperscalers have even purchased power plants to secure long-term power sources.”
And the anticipated impact of aging infrastructure, worsening extreme weather events, and an increasing number of power outages has the potential to stymie growth.
This year, the power grid is expected to operate at 94% of permitted capacity when demand is highest, i.e. in the hottest hours of the summer. By 2033, though, the report found that power demand is expected to close in on peak power output — and even exceed supply, when considering data center growth projections and expected power plant retirements and additions — which leaves “little margin for error.”
