In recent years, a notable shift has taken place within the commercial real estate landscape of the United StatesThe most sought-after properties are no longer traditional office buildings or expansive shopping mallsSurprisingly, the surge in demand is directed towards data centers, the backbone of the digital age.

This transformation can be largely attributed to the staggering advancements in technology, particularly in artificial intelligence (AI) and machine learning, which generate an insatiable need for high-performance computing and vast amounts of data storageAs a result, significant investments from tech giants such as Google, Microsoft, and Meta are pouring into the construction and expansion of data centers across the nation, driving billions in capital specifically for this purpose.

Power availability and land access have emerged as the two most critical factors influencing the selection of sites for new data centersUnfortunately, the ongoing scarcity of energy infrastructure and land in key regions presents considerable hurdles to further expansionThus, there is a shift of focus toward “new districts” as firms seek opportunities to circumvent these limitations.

With the omnipresence of cloud computing, AI, and big data technologies, the demand for large-scale data centers in the United States continues to soarRecent findings from the Industrial Information Resources (IIR) predict that the electricity consumption of U.S. data centers will double from 17 gigawatts in 2022 to 35 gigawatts by 2030.

As the most significant players in the technology sector scramble to establish their presence in this lucrative market, the data center construction boom is underwayReports indicate a steady and robust expansion of data facility footprints nationwide, with major tech firms spearheading this momentumAccording to Sean Fahy, Vice President of Data Center Strategy at Jones Lang LaSalle, these industry leaders are constructing their own data centers with a compounded annual growth rate of 20 to 30% and investing up to billions into these new infrastructures.

Google has committed several billion dollars to expand its data center in Oregon, in addition to a $600 million investment in Iowa

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Meanwhile, Microsoft has been systematically expanding its Boydton data center in Northern Virginia and is also in the process of expanding its facilities in San Antonio, TexasMeta has similar ambitions, with plans for new data centers in Nebraska and Texas, backed by substantial financial contributions.

However, despite this fervent development activity, many companies encounter the significant challenge of limited space in primary regions to construct data centersNorthern Virginia, recognized as the world's largest market for data centers, is currently facing severe resource scarcity, with only 0.2% availability of suitable sitesThis reality has prompted developers to extend their search for viable land for future data center projects.

The primary concentration of data centers in the U.S. exists in Northern Virginia, extending outreach to secondary markets, including central OhioA report by CBRE indicates a staggering 26% growth in the capacity of major data center markets in 2023, with Northern Virginia maintaining its position as the largest market, reaching a capacity of 1.6 gigawattsIn contrast, emerging markets, particularly in the Northwest, witnessed an increase of 554 megawatts in capacity.

According to Carl Beardsley, a Senior Manager at Jones Lang LaSalle, many firms are now aiming to establish new data centers in regions abundant in power and land resourcesPriya Vellamackani, who oversees data center operations at the company, acknowledges that the limited availability of land is restricting the expansion of these facilities.

The rapid escalation in demand for data centers has also compressed construction timelines, consequently enhancing this sector’s need for capitalInvestment in data centers as an alternative asset class has attracted the interest of numerous investorsPatrick Wilson, a manager at an investment firm, notes that the rise of remote work has redirected significant capital flow into infrastructure supporting data centers, telecommunications, and fiber optics.

Amidst these developments, it is crucial to recognize the looming challenge of power consumption

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According to a forecast by the International Energy Agency (IEA), the proliferation of generative AI technologies, which are heavily reliant on energy, could potentially escalate global data center electricity consumption to 2.3 times what it was in 2022 by 2026. Elon Musk has voiced concerns on this subject as well, suggesting that the next major shortage in AI development will likely be energy itself.

A recent report by Barclays Bank highlighted that by 2030, energy demand from data centers is expected to constitute approximately 9% of the United States' total energy needsData from Barclays shows that the energy requirements of Google and Microsoft data centers have surged by 20% and 26% respectively in 2023.

As computational loads increase, so too does the energy consumption of serversTraditional data center server racks usually operate at power levels between 10 to 14 kilowatts, whereas AI-focused racks range from 40 to 60 kilowattsRemarkably, a single query response from generative AI consumes ten times more energy than a single Google search.

For instance, consider ChatGPT, a prominent player in AI technology, which requires approximately 500,000 kilowatt-hours of electricity per day to handle about 200 million inquiriesIn stark contrast, a typical American household consumes just 290 kilowatt-hours dailyAs previously mentioned, with primary data center markets experiencing land shortages, many companies are refocusing their attention on new regions for constructionHowever, these emerging cities often lack the necessary power infrastructure to accommodate such expansion, resulting in considerable delaysCurrent estimates indicate that new data centers can expect a waiting period of around 2 to 3 years to connect to the grid, while substantial upgrades to the power grid can take between 5 to 10 years.

There is a growing urgency among operators to secure more robust policy support due to apprehensions surrounding unstable power supplies

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In Virginia, for example, the capacity of high-voltage transmission lines has reached its limit, putting delays on upcoming data center projects at riskResponding to this challenge, Virginia has passed legislation to expedite the approvals for a $60 million transmission project, an initiative endorsed by various industry giant stakeholders including Amazon.

In light of the escalating energy demands, data center operators are proactively exploring sustainable practices and technological innovationsUtilizing cutting-edge cooling technologies and renewable energy sources, there is a concerted effort to transition data centers towards more environmentally-friendly operationsMany establishments are now harnessing wind and solar energies to lessen dependence on traditional fossil fuelsThe incorporation of liquid cooling systems has also made significant strides in improving energy efficiency while simultaneously reducing cooling costs.

In terms of technological advancements, data centers are investigating the use of AI and big data analytics for optimizing energy management and operational efficienciesBy employing smart grid technologies, these facilities can dynamically adjust and optimize energy use, thereby minimizing wasteFurthermore, AI systems can more accurately forecast energy demands and make adaptations accordingly, streamlining energy utilization.

Moreover, the industry is actively pursuing additional eco-friendly technologies and strategies to mitigate environmental impactsSome data centers are testing modular designs which not only facilitate faster and more flexible construction but also minimize waste and carbon emissions during the development phaseThere is also a trend among some data center operators to utilize recyclable materials and sustainable building supplies aimed at further reducing their ecological footprint.

The rapid expansion of the data center sector has also ignited discussions around land use and environmental conservation

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