In today’s hyperconnected world, data centers have transcended the notion of mere buildings, emerging as a transformative asset class driving global digital economies.

Investors, urban planners, and technology leaders now view these facilities as core real-estate asset class with strategic importance akin to transportation hubs and power utilities.

A New Era: From Buildings to Infrastructure

The term “digital infrastructure” encapsulates more than wires and servers. It represents a foundation of digital infrastructure that underpins every facet of modern life, from streaming entertainment to real-time artificial intelligence processing.

Unlike traditional real estate sectors that experience cyclical highs and lows, data centers benefit from secular growth drivers. Cloud adoption, AI, 5G rollouts, e-commerce expansion, Internet of Things (IoT) growth, and edge computing all converge to fuel demand for high-density compute facilities.

• Cloud and enterprise digital migration
• AI workloads requiring vast power blocks
• 5G network densification driving edge nodes
• Streaming, e-commerce, and IoT expansion

McKinsey estimates global data center demand may grow by a factor of 2.5 to 3 by 2030, while U.S. demand could expand 20–25% annually. This structural boom is redirecting capital, powered land, and physical real estate into the sector, ensuring resilience even amid geopolitical and economic turbulence.

Capacity Crunch and Expansion Dynamics

North America’s primary colocation markets reported 8,155 MW of supply in the first half of 2025—up 17.6% from the prior half and 43.4% year-over-year. Yet vacancy hit a record-low 1.6%, illustrating record demand through early 2025 and extremely tight conditions driven by hyperscalers and AI tenants.

Developers are racing to break ground on new capacity. Under-construction projects totaled 5,242.5 MW in H1 2025, a 61.5% increase from H2 2023, and a pipeline near the H2 2024 peak of 6,350 MW. Remarkably, 74.3% of that capacity is already preleased, underscoring how cloud and AI occupiers are locking in future capacity amid power and land constraints.

Overall sector vacancy hovers around 2.3%, reinforcing the narrative of insatiable tenant demand narrative. Hyperscale cloud providers and AI workloads dominate requirements, often seeking 10+ megawatts of contiguous power and advanced cooling solutions. Cabinets supporting AI racks can demand up to 100 kW each—far beyond traditional enterprise densities—driving a complete redesign of data hall infrastructure.

Economics and Investment Trends

Rental rates have surged at roughly a 12% compound annual growth rate over the past 3–5 years. In H1 2025, average asking rates for 250–500 kW requirements rose 2.5% versus H2 2024. Larger deals (≥10 MW) saw lease rate jumps up to 19% in key markets such as Silicon Valley, Northern Virginia, and Chicago.

• Silicon Valley 10 MW+ pricing up 19%
• Northern Virginia 10 MW+ pricing up 13.8%
• Chicago 10 MW+ pricing up 15.4%

Traditional enterprises now face sticker shock, as lease rates have effectively doubled from $70–80 per kW to $150–160 per kW. Lease terms have also lengthened from five to seven years up to ten or more, reflecting landlord preference for mission-critical hyperscale tenants.

On the investment front, transaction volumes dipped over 50% year-over-year in H1 2025 to under $1 billion, a temporary lull attributed to macro uncertainty and utility constraints. Nevertheless, fundamentals remain robust. Initial cap rates for Class-A data centers typically sit 100–150 basis points above the 10-year U.S. Treasury yield, and investor appetite spans infrastructure funds, pension plans, sovereign wealth, and traditional real estate players.

As deals delayed by long utility lead times and geopolitical factors close in H2 2025, CBRE expects capital flows to rebound. Joint ventures and forward funding will power the next wave of development, as the sector cements its status as a long-duration, essential infrastructure play.

Land, Location, and Power Paradigm

Data centers are reshaping real estate markets. Over the past two years, 24% of industrial-zoned land acquisitions in the U.S. were earmarked for data center development. Hyperscalers accounted for over 10% of all commercial development site purchases in 2024, often outbidding traditional industrial users for powered land.

Sites now typically require 250, 500, or even 750+ MW of power. Developers prioritize large tracts with robust utility access and logistical advantages, creating a strong intersection between data center and industrial real estate.

Power availability and time-to-power have emerged as the dominant site-selection criteria—superseding traditional factors such as proximity to central business districts. Lead times for high-voltage infrastructure can stretch three to seven years, forcing developers and occupiers to factor in utility timelines as much as land costs.

• Investment in high-voltage substations and grid upgrades
• Strategic partnerships with utilities and governments
• Emphasis on sustainable power sources and resilience

As data centers become integral to national and regional economic strategies, regulators and communities are adapting zoning policies, offering incentives, and planning for adequate grid capacity. Municipalities that proactively integrate data center development into their growth plans stand to benefit from job creation, tax revenues, and enhanced digital connectivity.

With vacancy at historic lows, rents climbing steeply, and investment flows ramping up, data centers—once speculative real estate plays—have morphed into very low vacancy rates and indispensable pillars of the digital economy.

For investors, developers, and policymakers, recognizing data centers as a distinct asset class is no longer optional—it’s essential to navigating the next decade of technological transformation and economic growth.