AI demand drove a record $57 billion in global data center investment in 2024, according to a recent report from Colliers.
The report said hyperscalers make up around 80 percent of all data center demand, with colocation operators in North America seeing their supply grow by more than 40 percent in 2024 alone, from 12.4GW in 2023 to more than 18GW in 2024.
This is not including the additional 30GW of planned capacity in North America.
Vacancy pushes industry to its limits
However, declining vacancy rates are pushing the industry to its limits.
“The demand for AI and digital infrastructure is growing faster than ever, and the data center industry is at a crossroads,” said Raul Saavedra, vice chair, head of data center advisory, Americas at Colliers. “Power constraints are now one of the most significant challenges for operators. As AI adoption increases, so too does the demand for energy, and securing enough power is becoming a critical factor for success.”
According to Colliers, traditional data center hubs such as Northern Virginia, Dallas, and California are reaching near full capacity. In Northern Virginia, more than 1.4GW of the 1.5GW absorbed in 2024 was pre-leased, pushing vacancy rates to below one percent.
A recent report from JLL said that colocation vacancy rates have plummeted to a record low of 2.6 percent in North America.
The US could experience a data center supply deficit of more than 15MW, according to the report.
As a result, operators are looking at emerging markets. Reno and Hillsboro have grown as extensions of Northern California’s market, whilst Columbus and Minneapolis have gained traction due to their proximity to Chicago.
A Newmark report named West Texas as an emerging data center location.
The drive for power
The report also found that the drive for power resources is reshaping the data center landscape. Hyperscalers are signing major renewable energy agreements, incorporating solutions such as small modular reactors and partnerships with local power grids.
As AI continues to drive demand, operators will need to adopt energy-efficient and high-density models to keep up with growth, said the report.
Green energy solutions, such as solar, wind, field cells, hydrogen, nuclear, and geothermal are in various stages of development for data center usage.
Several SMR firms have signed agreements with data center operators in the last 12 months, including Kairos and Deep Fission.
Sam Altman-backed Oklo has been the most active in the market. In January, the firm inked an MoU with RPower to deploy a power model that combines natural gas and nuclear power for the data center sector.
Before this, it signed a non-binding master power agreement with US data center developer Switch to supply up to 12GW of power through 2044. It also has agreements with Equinix, Prometheus Hyperscale, and two undisclosed data center operators. In total, Oklo has a customer pipeline exceeding 14GW of power.
AWS has also signed three agreements with Energy Northwest, X-Energy, and Dominion Virginia to support the deployment of more than 600MW of power across Washington and Virginia.
The demand for digital infrastructure shows no signs of slowing and remains one of the most promising sectors for investment opportunities.
The report also drew on companies looking to transform Bitcoin mining facilities into AI-focused data centers. For example, Core Scientific is investing $4 billion to build an AI data center in Denton.
Applied Digital also secured $450 million to build a data center for HPC applications.
