Global data center construction will (again) reach record levels in 2025.
Ten gigawatts of new capacity is expected to break ground, and another 7 GW will reach completion, according to a report out today from real estate services firm JLL. The market is likely to expand as much as 20% through 2027.
This year’s projects, which include both hyperscale and colocation segments, will require approximately $170 billion in construction loans and permanent financing over the next 12 months.
By its sheer scale, this growth — and the massive power demand that comes with it — is prompting both financing structures and data center project design to shift. For instance, JLL found that a split is emerging between facilities designed specifically for artificial intelligence training, and those for inference operations.
AI training facilities often require up to a gigawatt of power or more. As a result, developers are starting to site them near to power sources, as opposed to the traditional approach of siting near population centers. Inference facilities, though, are still being built closer to population centers, to ensure lower latency.
“This separation is necessary due to the massive computational requirements for training versus the more distributed nature of inference operations,” the report explained. It’s a similar split that the industrial sector is experiencing: a split between regional warehouses, and last-mile facilities.
That said, the report caveats that lower-intensity workloads, like data storage and cloud-based applications will still make up the majority of demand for the foreseeable future. In most AI adoption scenarios, AI workloads represent less than half of data center capacity in 2030.
New markets, new power sources
This attention on new markets was telegraphed a year ago. In its 2023 report, JLL found outsized growth in so-called “secondary markets” like Salt Lake City, Austin, and Las Vegas.
In 2025, that trend will continue and intensify, JLL predicts.
Hyperscalers are leading the way into new markets. In 2024, they poured over $200 billion into new data centers, according to a preliminary review of company earnings report and JLL’s own research. The previous two years, CapEx remained relatively stable, hovering around $150 billion.
And colocation providers are expected to follow hyperscalers’ in their exploration of new geographies for data center hubs. These clusters, JLL expects, will likely eventually experience the same power delivery bottlenecks already unfolding in primary markets.
“Power scarcity garners most of the headlines, but equally as significant are the extended timelines required to build transmission lines,” the report found. “In many markets it can take four years or more to have high-capacity power lines extended to new development sites.”
The report acknowledges the seemingly sudden and fervent excitement about nuclear power — both traditional and small modular reactors — to help address those power constraints. If the number of nuclear deals signed in 2024 seemed high, just wait for how this year unfolds.
Small modular reactor agreements will likely double this year in terms of GW capacity, JLL anticipates. However, the report noted, colocating SMR installations with data centers isn’t likely, at least not in the near term.
(That’s a view shared by utilities, as Stan Blackwell, who leads Dominion’s data center practice, explained last year. “We have data center customers…call us up and say ‘hey can you put an SMR right next to my facility?’” Blackwell said. Those requests reflect a misunderstanding of what’s realistic, he added: “You’re not ever going to get the permit to put that in a major metropolitan area.”)
Financing shifts
The data center sector just experienced a five-year period of rapid growth, with more than $200 billion in merger and acquisition activity. According to JLL, the next phase — fueling the AI boom — will be defined less by massive consolidation, and more by joint ventures.
“The industry is reaching an inflection point as it matures, and the flow of megamergers will likely slow,” the report said. “The largest developers and operators have established global platforms over the last several years. In 2025 they will look to grow organically and through bolt-on acquisitions instead of paying a premium for growth via large-scale acquisitions.”
Data centers tend to change hands more slowly than other types of real estate assets, JLL explained. Global data center investment sales have averaged around $7 billion for the last several years, while office assets see $241 billion annually.
And global data center trading volume is likely to record “only a modest increase” in 2025. That’s in part due to a consistent rise in interest rates between the time when assets were financed several years ago, and today.
“Most owners are not in a position where they need to sell, so they are likely to hold onto assets over the next year and wait for financial conditions to become more advantageous,” JLL said.
