For the first time since 2020, the construction of new data centers in the U.S. has slightly decreased, even as demand from the AI boom is skyrocketing.
This might seem contradictory, but the latest report from real estate firm CBRE shows that in 2025, capacity under construction fell by 5.6%, while demand, measured by net absorption, jumped by an incredible 38%. The issue isn't a lack of money or interest; it's that we're hitting real-world limits. The core problem can be traced back to three key factors.
First is the power grid. The massive electricity required to run AI models is straining existing infrastructure. PJM, the largest U.S. power market, has seen future electricity demand forecasts surge, leading to higher costs and longer wait times for new connections. This grid congestion means that even if a developer has land and funding, they might have to wait years just to get the power turned on.
Second, this strain is creating political and legal hurdles. As electricity bills rise for everyone, local communities and state governments are becoming more cautious. In places like DeKalb County, Georgia (part of the booming Atlanta market), officials have placed temporary bans, or moratoria, on new data center projects to study their impact. The governor of Illinois even proposed pausing tax incentives for new data centers, arguing they need to pay their fair share for the grid upgrades they require. This growing resistance makes the already slow permitting process even more uncertain.
Third, the industry is adapting by shifting its strategy. Instead of concentrating only in traditional hubs like Northern Virginia, which are now heavily constrained, developers are moving to so-called 'frontier markets' in places like Chicago, Dallas, and the Midwest. Furthermore, a new trend is emerging: 'Bring-Your-Own-Power' (BYOP). This involves developers building their own power sources, like natural gas plants, right next to their data centers to bypass the grid's limitations. This strategic pivot shows just how severe the bottlenecks have become.
- Glossary
- Net Absorption: A measure of demand, calculated as the total square footage leased in a specific period minus the space that became vacant.
- Moratorium: A temporary prohibition of an activity. In this context, a temporary ban on approving new data center construction.
- PJM: PJM Interconnection is a regional transmission organization that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia.