Data centers are becoming increasingly vital in our society and their demand continues to grow. According to JLL’s North America Data Report, 2023 saw a strong year for data center demand. However, this high demand has led to limited availability and increased preleasing in primary markets, prompting a shift towards secondary and tertiary markets.
The main drivers of this demand include Generative AI which requires large amounts of power, as well as the ongoing increase in cloud and hyperscale usage. This has made it more challenging for enterprise users to find suitable colocation space with sufficient power capacity.
In terms of construction, there is currently over 5.3GW under development in primary and secondary markets combined. However, most of this capacity is already preleased with significant unleased capacity expected two or more years out from completion date.
Meanwhile, existing data centers are also undergoing expansion due to the realization that traditional designs cannot support the power demands required by AI technology which can be up to four times denser per cabinet than traditional deployments.
As a result of land scarcity and increasing competition for available power sources within core markets , developers are turning their attention towards tertiary markets such as Columbus (OH), Reno (NV), Minneapolis (MN), Mississippi (MS)and Indiana(IN). Additionally,international investors have begun expanding into Latin American & South American Markets .
JLL analysts predict that this trend will continue as major market capacities become limited leading developers seeking alternative options . They anticipate new tertiary market opportunities emerging where stranded powers may be utilized or repurposed from other uses .
