Data Centers Have Become the Hottest — and Most Contested — Category in Real Estate

Data center construction has become one of the most significant new forces in commercial real estate, with developers racing to secure land, power capacity, and water access in a market where demand is currently outstripping supply everywhere at once.

The computing demands of AI have turned data centers into one of the hottest categories in commercial real estate, with developers competing aggressively for sites that offer the specific combination of available land, reliable power capacity, and, in many designs, sufficient water access for cooling systems. Vacancy rates in the sector have fallen to historic lows in several key markets, with available capacity often leased before construction is even complete.

That demand has made grid power capacity, rather than land itself, the binding constraint in many markets, with some regions reporting years-long waits for the utility interconnection needed to power a new facility at the scale modern AI training requires.

Communities are pushing back on resource use

Local communities near proposed data center sites have increasingly raised concerns about competition for water and electricity, particularly in drought-prone regions, and several municipalities have introduced or debated restrictions on new data center development pending clearer resource-sharing agreements.

“We used to think about data centers as a real estate story. Increasingly, it’s an energy and water story that happens to involve buildings.”

Developers continue to push into new regions in search of available power capacity, a search that’s increasingly reshaping which secondary and tertiary markets see major real estate investment, based less on traditional population or business growth metrics and more on which utility grids have room to spare.