JLL: Record-Low Data Center Vacancy Fuels ‘Gold Rush’

(Illustration courtesy of JLL)

The North American data center sector is charging full speed ahead, with colocation vacancy plummeting to a record low of 2.6% and absorption levels doubling in just two years, according to JLL, Chicago.

But beneath the surface of this robust growth lies a brewing storm: the race for resources is reshaping the data center landscape, pushing development into new markets and forcing utilities to rethink how they handle the digital economy’s voracious appetite for energy, JLL noted in its North America Data Center Year-End Report.

“The data center sector remains one of the most favored real estate asset classes due to insatiable tenant demand, limited supply and rising rents,” said Andy Cvengros, Executive Managing Director and Co-Lead of U.S. Data Center Markets with JLL. “However, power availability has become the defining constraint on growth, pushing development into new markets in search of capacity. It’s the new ‘gold rush,’ as developers, occupiers and investors are competing for available power, land and equipment.”

Cvengros said more power generation is urgently needed for supply to keep up with demand.

Record-breaking year: Vacancy plummets as data center demand skyrockets

The report details “unprecedented” demand levels, with colocation vacancy in North America declining to a record-low 2.6% despite several years of record construction levels. Absorption totaled 4.4 GW in 2024 – a quadruple increase since 2020 – propelled by cloud providers, technology companies and finance sectors.

Artificial intelligence will be a key source of growth for the sector. Last year, AI represented about 15% of data center workloads, and by 2030, that percentage could grow to 40%, the report said.

Nearly 90% of absorption in 2024 was in primary markets, with northern Virginia rocketing back to the top spot with 847 MW of absorption in the second half. Northern Virginia now captures 50% of all North American demand. Chicago (308 MW), Phoenix (166 MW), Dallas-Fort Worth (123 MW) and Toronto (55 MW) round out the top five markets for absorption in the second half of the year.

“Data center rents continue to surge, with a 12% year-over-year increase in 2024 and an 11% CAGR since 2020, as landlords maintain strong negotiating leverage in a market with near-zero vacancy,” said Andrew Batson, Head of U.S. Data Center Research for JLL. “Tenants renewing five-year leases are experiencing significant sticker shock, facing up to 50% rent increases, and landlord concessions are becoming increasingly rare in this tight market.”