The question our data center experts most frequently field: ‘where is the power?’
One of commercial real estate’s hottest asset classes is also one of its most complicated. And a data center’s biggest challenge? Power.
Generative and Agentic AI. Cloud services. Bitcoin and the blockchain. Robotics. These and other drivers of U.S. data center demand are outpacing the power supply needed to run the servers that process and store it all. Global data center electricity use is projected to more than double to 945 terawatt-hours (TWh) by 2030 as AI and cloud demand surge. Yet available energy is limited: power shortages could restrict 40% of AI data centers worldwide by 2027.
Power scarcity is just one of several factors – including suitable land and rising costs – that add more complexity beyond traditional tech specs and service-level agreements. Data center investors face longer wait times for grid connections on top of new utility rules and, often, success depends on expertise in capacity planning, cooling, and network connectivity. Each of these factors is essential for profitability and long-term value.
This technical and logistical complexity further drives up operating costs and valuations. Investors will pour $1 trillion into U.S. data centers over the next five years as these costs rise, Blackstone estimates.
Ground rules: data center site selection requires a powerful strategy
The U.S. data center landscape is rapidly evolving, driven by land scarcity, power unavailability, and limited utility capacity. While traditional hubs remain strong, investors are increasingly looking to emerging markets (because of energy and land constraints in core markets) to meet growing demand for scalable, resilient infrastructure.
Strategic site selection requires solutioning around a few key areas, like balancing customer access, reliable power, and future expansion potential.
Consider Virginia’s “Data Center Alley,” which remains the country’s top data center hub, accounting for more than 70% of newly occupied space in recent quarters. But land in Loudoun and Prince William Counties is shrinking, and it’s taking Dominion Energy longer to connect new data centers to the grid. Rising costs and extended timelines are pushing occupiers to consider alternative markets for the inevitable future growth needs.
Where might they look?
Growth markets with reliable power and ample land are gaining traction, like these:
- Pennsylvania has seen rising industrial land deals for data center development, supported by robust energy infrastructure and proximity to major cities.
- Texas offers competitive electricity rates and a flexible grid.
- North and South Carolina provide more land, lower construction costs, and utilities that actively integrate renewable energy.
Sourcing debt and equity for data centers
U.S. data centers continue to attract significant capital, with debt and equity markets deepening to support large-scale developments. Global asset managers including Blackstone, KKR, and Brookfield have raised multi-billion-dollar funds for digital infrastructure, while MetLife and other institutions remain active lenders and equity investors.
This comes as capital markets are getting more liquid in the first half of 2025, after a two-year period of tight credit, cautious underwriting, and difficulty securing loans above $100 million. Now, in the first half of 2025, the pace of fundraising for alternative investments – especially data centers – surpasses many traditional sectors.
Who’s powering this data boom? Private credit and other alternative debt sources now offer flexible capital stacks by combining senior and mezzanine loans with preferred equity, often through a single financing structure. This broader mix of capital is what’s helping reshape the financing market for data centers for the better. Investors are increasingly opting for alternative financing strategies with more funding options, and heightened competition is fueling confidence and momentum across the sector, providing money ready to fuel our digital futures.
The emerging prevalence of these alternative markets? Our data shows that nearly 50% of the largest U.S. transactions in Q2 occurred in rural or non-traditional markets, highlighting a shift beyond major metropolitan areas.
Critical to finding your way in a new place? Developing strong partnerships with those who can help you power up.
Power in numbers: relationships keep the data flowing
Relationships are critical to moving data center projects across the finish line. Navigating power access, land constraints, and fast-changing market conditions isn’t possible without a strong network of local stakeholders, utilities, and third-party energy partners.
It’s these trusted relationships that let investors and developers gain early insight into capacity, secure priority with service providers, and resolve hurdles quickly – capabilities especially vital in markets where competition is fierce and timelines are tight.
At Avison Young, we use this network-driven approach to help our clients solve complex land use, power provisioning, and regulatory issues before they stall progress or drive up costs. By bringing together the right partners early on – across energy, utilities, and site development – teams can accelerate timelines and better align all components for successful, large-scale data center delivery, even as the market grows more competitive and decentralized.
Speaking of costs, what are those, anyway?
Watts, wires, and your wallet: decoding the data center ledger
Building large-scale data centers involves significant upfront costs, including land acquisition, construction, energy, cooling, and network connectivity. Operational needs, including power redundancy, efficient cooling, and fiber interconnections, further increase total project expenses.
And from there? Costs rise rapidly as data center capacity increases, particularly for hyperscale and edge facilities that require advanced infrastructure upgrades and redundant systems.
Given the scale and complexity of projects like these, joint ventures and public-private partnerships have become increasingly important. These collaborations allow operators to share risk, secure long-term financing, and leverage local incentives while maintaining flexibility for growth.
Take Meta’s $29 billion data center financing in Louisiana – backed by debt partner Pimco and equity provider Blue Owl. The transaction highlights the massive capital needed for modern data centers while underscoring the importance of the strategic partnerships needed to execute multi-billion-dollar projects.
Data center deals by the numbers
$1T
40.5 GW
1.6%
Generating on-site solutions to power past potential energy pitfalls
A Bloom Energy survey found that 38% of data centers plan to add on-site generation by 2030, with 27% aiming to be fully powered by it. That’s up from just 1% last year, showing this is a trend with a tremendous amount of upward momentum.
And it’s no great shock. Data centers often face grid congestion, aging infrastructure, and natural disaster risks. And operators have to prevent even the briefest of outages, which can trigger costly delays. To safeguard operations, owners and occupiers already have to rethink reliance on the conventional grid and prioritize redundant, diversified power strategies that offer more direct energy control.
This could come through solar and wind energy, which provide cleaner power and greater independence, but require battery energy storage systems (BESS), which can be expensive and face supply chain restraints. Or through reliable hybrid approaches that combine renewables, grid access, and on-site generation with advanced storage to ensure consistent, high-volume power.
Regardless of which approach you take, it’s likely not a matter of if but when the need for energy innovation will come calling. All data centers should start considering more localized solutions, charged and ready for any stage of growth.
Current connectors: plugging into Avison Young’s expertise
With more than a billion dollars in data center transactions since 2022 – including leasing, debt and equity, JV structuring, and investment sales – our teams remain at the forefront of strategic deal execution and market expertise.
Our success with data center transactions comes from our teams’ deep market knowledge and relationships with utility providers, developers, investors, and local stakeholders. We help clients act quickly and confidently in this fast-moving sector, delivering outcomes that maximize scale, efficiency, and asset value.
The U.S. data center market is poised for continued growth, fueled by record leasing activity, historically low vacancy rates, and evolving technologies and energy solutions. The construction pipeline continues to expand, with nearly 4GW of colocation projects and nearly 5GW of hyperscale capacity either underway or planned – highlighting the sector's strong demand outlook. At the same time, net absorption remains healthily robust.
These trends create new opportunities for owners and occupiers to capture long-term value across established and emerging hubs. And the best part? We can help power progress at every stage, from groundbreaking to grid connection.
Reach out to our experts to learn more about how to make the most of this opportunity.
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Howard Berry
Principal, Director, Data Center Solutions, CA License #01795693
Sacramento, San Francisco, Palo Alto-Silicon Valley
Data Centers
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Marion Jones
Principal, Executive Managing Director of U.S. Capital Markets
New York City
Capital Markets Group, Debt & Equity Finance, Investment Sales
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