When it comes to building data centers, one requirement towers above all others: power. While land, materials, labor, access, water, and permits are all essential for property development, the insatiable energy demands of data centers set them apart from almost any other type of project.
The sheer volume of electricity required to power servers and networking equipment defines the limits of what a data center can accomplish. As artificial intelligence, massive data analysis and other forms of high-powered computation become more central to the digital economy, U.S. energy groups are racing to keep up. The Financial Times reported that U.S. utility capital expenditures are expected to soar to $212.1 billion in 2025—a 22.3% increase over the previous year and a staggering 129% jump from 2015, according to investment bank Jefferies.
“Over the last couple of decades, we’ve seen a relative paucity of new investment,” Julien Dumoulin-Smith, a power utilities and clean energy analyst at Jefferies, told the Financial Times. “We’re now seeing a very meaningful shift and should see a sharp uptick as data center deployment accelerates.”
This surge in data center development is reshaping the real estate landscape. “This is a real estate accommodation of a wave of technology that is now morphing from the cloud and server farms of a few years ago to AI,” Marcus & Millichap CEO Hessam Nadji explained during a January appearance on CNBC. “Only 20% of the current capacity is AI-oriented, and just think about how much AI is going to grow.”
Atlanta, for instance, has emerged as a hotbed for new data center projects, with at least 10 multi-million-square-foot developments proposed recently. “Atlanta has always been a good market, but in the last couple of years, it’s become a great market,” JC Witt, senior vice president of data center investments for Prologis, told the Atlanta Journal-Constitution.
The scale of investment is equally impressive on the corporate side. Last month, Crusoe secured a $750 million credit facility to expand its artificial intelligence operations, supporting its cloud platform and specialty data centers. According to the company, its data center footprint now spans 4.2 million square feet and holds 1.35 gigawatts of computing power.
Yet, as the Financial Times noted, both governments and companies are beginning to reckon with the enormous costs of building out the necessary infrastructure. “The longest-term risk to the sector that I’m concerned about is affordability,” Nicholas Campanella, Barclays’ U.S. power and utilities analyst, told the Financial Times. “Since the pandemic, we’ve been tracking around 10 percent year-over-year increases [in consumer energy bills]. There is going to be a point where stakeholders like politicians, consumer advocates and regulators want to step in and deal with that.”
The mounting expenses could lead to special, higher rates for energy-hungry data centers and force developers to expand into secondary and tertiary markets as they seek new sources of power and land. The race to power the future of technology is on—and it’s changing the American landscape in profound ways.
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