The AI Data Center Land Grab
Min 1
Data center supply in primary markets increased 34% year-over-year to 6,922.6 megawatts according to CBRE, far surpassing the 26% increase in 2023. Primary markets had record 6,350 megawatts under construction at year-end 2024, more than double the 3,077.8 megawatts at year-end 2023. Overall vacancy fell to record-low 2%.
Atlanta led all primary markets for net absorption in 2024 with 705.8 megawatts, surpassing perennial leader Northern Virginia's 451.7 megawatts. Data center storage capacity projected to grow from 10.1 zettabytes in 2023 to 21.0 zettabytes in 2027 according to JLL. That 19% compound annual growth rate created unprecedented real estate demand nobody priced in.
The data center explosion exposes operators who recognized that powered land with utility commitments represents the scarcest commercial real estate asset class available
Min 2
AI workloads transformed data center requirements. Generative AI demands 300 to 500-plus megawatts versus traditional data center requirements, fundamentally reshaping facility design and site selection. Power access became the primary constraint limiting development. Northern Virginia fought power shortages to maintain sufficient energy for facilities despite being the largest data center market globally.
Land with pre-secured utility commitments became gold standard. Developers and non-traditional buyers like electric vehicle and chip manufacturers competed for powered sites. These parcels offered guaranteed power access amid rising constraints and long utility lead times. Markets like Charlotte, Northern Louisiana, and Indiana attracted investment through tax incentives, available land, and power accessibility.
Annual data center investment sales exceeded $6.5 billion in 2024 according to CBRE. Average sale prices increased year-over-year reflecting growing scale of data center campuses. Rental rate increases of 10% to 15% occurred in 2024 following 16% year-over-year pricing growth in 2023. Supply constraints combined with AI-driven demand sustained pricing power.
Min 3
McKinsey projected data center power consumption increasing from 17 gigawatts to 35 gigawatts by 2030. Newmark forecasted data center demand doubling by 2030. Blackstone purchased QTS Realty for $10 billion in 2021, signaling institutional recognition of asset class potential. KKR acquired CyrusOne for $15 billion same year, validating data center real estate as core institutional holding.
Virginia boasted 15.4 gigawatts in development pipeline according to Cushman & Wakefield. Americas led planned data center capacity globally. Land values in mature markets drove attention toward cost-effective emerging locations like Johor and Pennsylvania. Midwest markets like Indianapolis and Iowa remained most affordable, attracting spillover demand from expensive neighbors.
The dollar spread between powered and unpowered land reached 300% to 500% premiums in primary markets. Sites with utility commitments commanded prices of $3 million to $5 million per acre versus $600,000 to $1 million for comparable unpowered parcels. That premium reflected years of utility coordination compressed into immediate availability.
Min 4
Smaller operators participated through land assembly and utility coordination rather than facility development. Independent investors identified emerging markets before institutional capital recognized power availability advantages. Local market knowledge about utility capacity and regulatory environments created information asymmetry favoring nimble operators.
The competitive advantage emerged from patient site selection. Operators spending 12 to 24 months securing utility commitments before marketing powered sites to developers captured arbitrage between raw land costs and powered land valuations. Total basis stayed 40% to 60% below market for powered sites when operators controlled utility coordination timeline.
Construction completion timelines extended 24 to 72 months due to power supply delays according to CBRE. That elongated development cycle increased value of powered sites ready for immediate construction. Developers paid premiums for sites eliminating years of utility negotiations and infrastructure buildout.
Min 5
The data center land boom democratized participation in digital infrastructure growth. Operators assembling land portfolios in secondary markets positioned for eventual data center development captured returns traditionally reserved for large institutional developers. Phoenix, Austin-San Antonio corridor, and Omaha showed significant investor interest due to land availability and power infrastructure.
Edge data centers serving local processing needs created opportunities in smaller markets. Smart cities, autonomous vehicles, and streaming services required low-latency processing closer to end-users. That geographic distribution pushed data center demand beyond traditional primary markets into secondary and tertiary cities.
Land portfolios positioned near utility substations with expansion capacity delivered option value as data center demand spread geographically. Operators holding powered sites in emerging markets captured first-mover advantages when hyperscale tenants sought alternatives to constrained primary markets.
Closing Takeaway
The AI data center surge revealed power availability as the ultimate constraint on digital infrastructure growth. Land with secured utility commitments became scarcest commercial real estate asset as demand doubled supply despite record construction. Operators who recognized powered land scarcity positioned sites before institutional capital fully repriced the asset class. The advantage persists through 2027 as AI workload growth outpaces power infrastructure development. By the time utility capacity catches up to demand, operators controlling powered sites will have captured arbitrage unavailable to late entrants bidding against established hyperscale competition.
