How low can colo go, asks JLL, as datacenter vacancy rates near zero
(2025/08/19)
- Reference: 1755626529
- News link: https://www.theregister.co.uk/2025/08/19/jll_vacancy_rate/
- Source link:
Colocation capacity in North American datacenters has dropped to a record low, with much of the construction pipeline already pre-leased, making this a key brake on growth. Keeping up with demand could take as much as $1 trillion in fresh datacenter builds before the decade is out.
The latest [1]North America Datacenter Report from real estate services biz JLL says that the first half of 2025 saw considerable turbulence, amid reports of [2]hyperscale cloud operators walking away from leasing negotiations . Yet despite this, demand remains red hot.
JLL's report refrains from mentioning AI at all, even though the [3]fear of missing out to rivals in AI development has driven the frenzied increase in infrastructure demand over the past couple of years.
[4]
Vacancy in the North American market - a measure of how much capacity is available for leasing – has declined to a new record low of 2.3 percent, with JLL forecasting that pre-leasing activity will continue to hold this figure down from now through 2027. The vacancy rate stood at 9.8 percent back in 2020.
[5]
[6]
While this could be considered a sign of healthy demand, JLL warns that a lack of available capacity could constrain economic growth and undermine national security, as datacenters are critical infrastructure, and restrictive market conditions are counterproductive over the long term.
The average wait time for a grid connection across North America is now four years, according to the report, with power delays representing a significant hurdle in efforts to alleviate the shortage of new colocation capacity.
[7]
This problem isn't restricted to North America, as [8]demand for datacenter space in Europe outstripped supply during 2023, with hyperscalers snapping up much of the available capacity, often pre-leasing to secure it while sites are still being developed. To make things worse, the construction of new facilities was hampered there by constraints on available power and land.
North America utilities are now demanding hard deposits earlier in power procurement, raising the stakes for colo developers. Meanwhile, US commercial electricity rates have increased more than 20 percent over the past few years as utilities struggle with aging infrastructure and record electricity demand.
JLL identifies Northern Virginia, Dallas, and Atlanta as the locations that have seen the largest increases in capacity, with 3,975 MW, 1,008 MW and 828 MW added since 2020, respectively. However, on a percentage basis, Columbus and Austin/San Antonio have expanded the most, by more than four times over the same period, though starting from a much smaller baseline.
[9]Datacenter vacancies hit record low as power shortages stall projects
[10]Hyperscalers to eat 61% of global datacenter capacity by decade's end
[11]Datacenter market offers us captive customer base, say investors
[12]Colo operators flock to emerging markets to build DCs
And there is no sign of a slowdown, with the North American colocation market expected to continue with a 20 percent compound annual growth rate (CAGR) through 2030, by which point this sector may total more than 42 GW of capacity.
Putting its real estate hat on, JLL observes that the datacenter arena remains among the most favored real estate asset classes due to "insatiable tenant demand, limited supply and rising rents."
[13]
This tallies with [14]comments by Natalia Akst, managing director for Macquarie Asset Management , at the recent [15]Datacloud Global Congress in Cannes, France. Akst praised the "financially attractive" features of the bit barn market for investors, saying there are high barriers to entry, and customers find it difficult to change providers once they have signed up, meaning it offers low risk and stable cash flows.
JLL estimates that up to $1 trillion worth of datacenter development will be needed to meet demand in North America by 2030, and all of those projects will need to secure construction loans and/or permanent financing. ®
Get our [16]Tech Resources
[1] https://www.jll.com/en-us/insights/market-dynamics/north-america-data-centers
[2] https://www.theregister.com/2025/04/22/aws_datacenter_leases/
[3] https://www.theregister.com/2025/05/06/ibm_ai_investments/
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cloudinfrastructuremonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aKTz9tJAbqbT_UXxyh74NAAAAI4&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cloudinfrastructuremonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aKTz9tJAbqbT_UXxyh74NAAAAI4&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cloudinfrastructuremonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aKTz9tJAbqbT_UXxyh74NAAAAI4&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cloudinfrastructuremonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aKTz9tJAbqbT_UXxyh74NAAAAI4&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://www.theregister.com/2024/02/20/europe_datacenter_space/
[9] https://www.theregister.com/2025/03/19/datacenter_vacancy_record_low/
[10] https://www.theregister.com/2025/06/25/hyperscaler_datacenter_capacity/
[11] https://www.theregister.com/2025/06/24/datacenter_market_captive_audience/
[12] https://www.theregister.com/2025/08/12/emerging_markets_now_the_growth/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cloudinfrastructuremonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aKTz9tJAbqbT_UXxyh74NAAAAI4&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://www.theregister.com/2025/06/24/datacenter_market_captive_audience/
[15] https://www.datacloudglobalcongress.com/
[16] https://whitepapers.theregister.com/
The latest [1]North America Datacenter Report from real estate services biz JLL says that the first half of 2025 saw considerable turbulence, amid reports of [2]hyperscale cloud operators walking away from leasing negotiations . Yet despite this, demand remains red hot.
JLL's report refrains from mentioning AI at all, even though the [3]fear of missing out to rivals in AI development has driven the frenzied increase in infrastructure demand over the past couple of years.
[4]
Vacancy in the North American market - a measure of how much capacity is available for leasing – has declined to a new record low of 2.3 percent, with JLL forecasting that pre-leasing activity will continue to hold this figure down from now through 2027. The vacancy rate stood at 9.8 percent back in 2020.
[5]
[6]
While this could be considered a sign of healthy demand, JLL warns that a lack of available capacity could constrain economic growth and undermine national security, as datacenters are critical infrastructure, and restrictive market conditions are counterproductive over the long term.
The average wait time for a grid connection across North America is now four years, according to the report, with power delays representing a significant hurdle in efforts to alleviate the shortage of new colocation capacity.
[7]
This problem isn't restricted to North America, as [8]demand for datacenter space in Europe outstripped supply during 2023, with hyperscalers snapping up much of the available capacity, often pre-leasing to secure it while sites are still being developed. To make things worse, the construction of new facilities was hampered there by constraints on available power and land.
North America utilities are now demanding hard deposits earlier in power procurement, raising the stakes for colo developers. Meanwhile, US commercial electricity rates have increased more than 20 percent over the past few years as utilities struggle with aging infrastructure and record electricity demand.
JLL identifies Northern Virginia, Dallas, and Atlanta as the locations that have seen the largest increases in capacity, with 3,975 MW, 1,008 MW and 828 MW added since 2020, respectively. However, on a percentage basis, Columbus and Austin/San Antonio have expanded the most, by more than four times over the same period, though starting from a much smaller baseline.
[9]Datacenter vacancies hit record low as power shortages stall projects
[10]Hyperscalers to eat 61% of global datacenter capacity by decade's end
[11]Datacenter market offers us captive customer base, say investors
[12]Colo operators flock to emerging markets to build DCs
And there is no sign of a slowdown, with the North American colocation market expected to continue with a 20 percent compound annual growth rate (CAGR) through 2030, by which point this sector may total more than 42 GW of capacity.
Putting its real estate hat on, JLL observes that the datacenter arena remains among the most favored real estate asset classes due to "insatiable tenant demand, limited supply and rising rents."
[13]
This tallies with [14]comments by Natalia Akst, managing director for Macquarie Asset Management , at the recent [15]Datacloud Global Congress in Cannes, France. Akst praised the "financially attractive" features of the bit barn market for investors, saying there are high barriers to entry, and customers find it difficult to change providers once they have signed up, meaning it offers low risk and stable cash flows.
JLL estimates that up to $1 trillion worth of datacenter development will be needed to meet demand in North America by 2030, and all of those projects will need to secure construction loans and/or permanent financing. ®
Get our [16]Tech Resources
[1] https://www.jll.com/en-us/insights/market-dynamics/north-america-data-centers
[2] https://www.theregister.com/2025/04/22/aws_datacenter_leases/
[3] https://www.theregister.com/2025/05/06/ibm_ai_investments/
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cloudinfrastructuremonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aKTz9tJAbqbT_UXxyh74NAAAAI4&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cloudinfrastructuremonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aKTz9tJAbqbT_UXxyh74NAAAAI4&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cloudinfrastructuremonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aKTz9tJAbqbT_UXxyh74NAAAAI4&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cloudinfrastructuremonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aKTz9tJAbqbT_UXxyh74NAAAAI4&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://www.theregister.com/2024/02/20/europe_datacenter_space/
[9] https://www.theregister.com/2025/03/19/datacenter_vacancy_record_low/
[10] https://www.theregister.com/2025/06/25/hyperscaler_datacenter_capacity/
[11] https://www.theregister.com/2025/06/24/datacenter_market_captive_audience/
[12] https://www.theregister.com/2025/08/12/emerging_markets_now_the_growth/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cloudinfrastructuremonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aKTz9tJAbqbT_UXxyh74NAAAAI4&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://www.theregister.com/2025/06/24/datacenter_market_captive_audience/
[15] https://www.datacloudglobalcongress.com/
[16] https://whitepapers.theregister.com/
Anonymous Coward
So, AI *will* be the cause of human extinction, but not in the way we thought!
Low risk and stable cash flows
abend0c4
I'm old enough to remember the first bit barn bubble. It was low risk and stable until it suddenly wasn't and customers were negotiating with receivers to extract their equipment from shuttered sheds.
But adding power supply uncertainty will turn it into a sure bet this time around...
Spying is expensive
Big brother MUST know which hand you wipe your arse with!