MBA NewsLink Q&A: JLL’s Stuart Miller on the Firm’s New Data Center Report

MBA NewsLink: The North American data center market absorbed a record 25 GW in the first half of 2026. From a valuation perspective, how are you advising clients to think about this unprecedented growth?

Stuart Miller: What we’re witnessing is truly historic, 25 GW of absorption in just six months, which is five times what we saw two years ago. From a valuation standpoint, this level of demand fundamentally supports asset values, but clients need to understand the nuances. With 99% occupancy and 95% of the 66 GW under construction already precommitted, we’re not looking at speculative growth, we’re looking at structural demand driven by AI adoption and cloud expansion.

However, valuers must carefully assess location-specific risk factors, particularly around power delivery timelines and community acceptance, which have become critical value drivers in today’s market.

MBA NewsLink: You mentioned community acceptance. The report shows a stark 65-point gap between AI support and local data center acceptance. How does this social license risk factor into valuations today?

Stuart Miller: That’s one of the most significant shifts we’ve seen in valuation risk assessment. While 79% of Americans support U.S. leadership in AI, only 14% support data center development in their own community. This creates what I call “approval risk premium.” We’re now seeing valuations diverge significantly between projects with strong community support versus those facing opposition. Sites with early community engagement, transparent communications around electricity and water use, and demonstrable local benefits; jobs, tax revenue, economic diversification, are commanding premiums. Conversely, projects facing organized opposition or regulatory uncertainty are being discounted accordingly. This wasn’t a material risk factor three years ago; today, it’s fundamental to our valuation methodology.

I view community acceptance as another essential layer of due diligence and development work that must be accounted for to achieve a build-ready site. Just as securing power has become a fundamental component of site development, community acceptance is now a critical criterion that must be adequately addressed to create a marketable, attractive powered land site. The parallel to power is striking: if a site has a clear pathway to power in the near term and acceptance from the local community, we see strong demand and robust pricing; if either power delivery or community acceptance remains uncertain, demand is demonstrably lower.

MBA NewsLink: With data center rents increasing nearly 70% since 2020 and current growth averaging 9% annually, how do you balance optimistic cash flow projections against potential market corrections?

Stuart Miller: The rent growth story is compelling. We’ve seen rates climb from around $105/kW/month in 2020 to $178/kW/month for 1-5 MW deployments, with minimal concessions and 3%+ annual escalations built into new leases. However, prudent valuation requires stress-testing these assumptions. We’re advising clients to model alternative scenarios, including one where demand normalizes around 2030, leading to portfolio optimization rather than continued exponential growth. Importantly, normalization doesn’t necessarily mean higher vacancy or rent decline, it means moderation. The key risk consideration is tenant credit quality. With hyperscalers accounting for 59% of demand and representing some of the world’s most profitable companies, the underlying credit risk is actually quite low. But we’re also seeing 11% of demand from neoclouds, where credit assessment is more complex and valuation discounts may be appropriate.

MBA NewsLink: The report indicates more than $700 billion in permanent debt financing will be needed over the next 30 months. How does this capital markets dynamic affect valuation risk?

Stuart Miller: The sheer scale is unprecedented; $175 billion in 2026 alone, rising to $322 billion by 2028 for new deliveries and refinancing. From a valuation risk perspective, this creates both opportunities and concerns. On the positive side, we’re seeing strong liquidity across credit tiers, with investment-grade hyperscale projects achieving 85% loan-to-cost at 200 basis points over benchmark, which supports valuations through higher leverage and lower discount rates. However, the $32 billion in high-yield issuance for AI-related projects introduces refinancing risk that must be underwritten carefully. For non-credit tenant deals, we’re seeing 200-300 basis points wider spreads and 70-80% leverage, which directly impacts exit cap rates and valuation. Valuers must also consider construction completion risk, with 66 GW under construction, any slowdown in financing availability or cost increases could materially impact project economics.

MBA NewsLink: Looking at specific markets, Texas now has 26 GW of capacity, making it the world’s largest data center market. What valuation considerations are unique to this frontier market expansion?

Stuart Miller: Texas exemplifies both the opportunity and risk in frontier markets, which now account for 77% of all capacity under construction. West Texas, Ohio, Louisiana, Indiana, these markets had virtually no data center capacity a decade ago. From a valuation perspective, frontier markets trade at discounts to established markets like Northern Virginia due to several risk factors: less proven demand depth, newer utility relationships, evolving regulatory frameworks, and less mature labor markets. However, they offer substantial advantages: lower land costs, competitive power pricing, and often more supportive local governments seeking economic development. The recent regulatory actions in Texas haven’t materially impacted ongoing construction, but they do introduce regulatory risk that we factor into valuations and further drive the divergence of the haves and have nots when it comes to powered land sites.

We are also seeing savvy players who approach development with an underlying thesis that power is the primary currency, and that can take many forms. These developers are prioritizing sites with optionality for a variety of power-related uses: a load from the grid for data center use as the primary objective, but also options for renewable generation or battery storage. With these kinds of options explored in tandem, a site is positioned for success in leveraging grid constraint to drive value.

We’re advising clients that successful frontier market investments require premium due diligence on power delivery certainty, community engagement strategies, and realistic absorption timelines. Projects that get these fundamentals right can deliver superior risk-adjusted returns, but the difference between best-case and worst-case scenarios is wider than in established markets.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)