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In 2025, business news heavily focused on data center construction, and with that attention came concerns over a potential building bubble. Commentators pointed out that a prominent billionaire real estate developer was raising red flags about the sector. Other industry observers warned of overbuild risks as AI-driven demand reshapes the data center landscape, and a recent Moody’s article noted that rapid capacity expansion raises the prospect of overbuilding if AI adoption curves flatten or shift direction.
The response from JLL analysts: stay calm. The sky is not falling.
“Bubble concerns are difficult to reconcile with 99% sector occupancy,” the analysts explained in a recently published report. They also noted that the largest data center tenants are among the world’s most profitable, highly rated companies, and that 92% of capacity currently under construction is pre-committed.
That 1% vacancy rate persists even amid what the report describes as “unprecedented construction levels.” As a result, the current environment looks more like sustained structural demand than a cyclical imbalance.
Furthermore, available capacity consists largely of small, fragmented blocks that offer limited flexibility for large-scale deployments. Tenants securing space today are often contracting for deliveries in 2027 and 2028.
Tackling the Frontier
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The JLL report defines the “data center frontier” as markets outside the traditional mature hubs such as Northern Virginia, Dallas–Fort Worth and Silicon Valley. Approximately 64% of the 35-gigawatt (GW) national construction pipeline is now in these frontier markets.
Texas leads the way with 6.5 GW of capacity under construction. The state could overtake Virginia as a dominant global data center market by 2030. Other states in the mix include Tennessee, Wisconsin and Ohio. Like Texas, these markets offer abundant energy resources and land, as well as business-friendly operating environments.
Of the current construction, 60% is leased, with the remaining 40% owner-occupied by hyperscalers. The top five hyperscalers have announced $710 billion of capital expenditures planned for 2026—enough to support 35 GW of new or refreshed capacity globally, according to the report.
The Ongoing Power Problem
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Despite headlines about aggressive building, data centers are not being constructed fast enough to keep up with demand. The report cites “significant infrastructure constraints,” primarily a lack of power.
JLL analysts noted that grid connection timelines now average four years or more. As a result, major tenants must secure capacity several years in advance, helping explain why so many are turning to frontier markets where power and land are more readily available.
At the same time, hyperscalers and other large operators are increasingly focused on renewable energy and battery energy storage systems as potential long-term solutions to power constraints.
Investors and Capital
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Even with lingering bubble concerns, investor appetite for data centers remains strong, especially for mission-critical digital infrastructure that can deliver long-term income streams. Data center sales totaled about $1.5 billion in 2025. The market also supported more complex structures such as forward sales, joint ventures and preferred equity arrangements, while debt markets generally viewed data center assets favorably.
Mergers and acquisitions activity remained active as well. One of the most notable transactions was the $40 billion acquisition of Aligned Data Centers by a consortium of investors, underscoring continued confidence in the sector’s long-term fundamentals.
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