In 2025, business news focused on data center construction. With that news came concerns over a building bubble. One CNBC write-up pointed out that “a billionaire real estate developer is waving a red flag over data centers.”
Meanwhile, a DataCenter Knowledge headline said “Analysts Warn of Overbuild Risks as AI Data Centers Reshape Industry.”
A recent Moody’s article also warned 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. Furthermore, the larger data center tenants are among the most profitable and highly-rated global companies, while “92% of capacity currently under construction is pre-committed.”
That 1% vacancy rate exists despite the report’s dubbing of “unprecedented construction levels.” As such, the current situation is more a case of sustained structural demand versus cyclical imbalance.
Finally, the available capacity consists of small, fragmented blocks that don’t offer much flexibility for larger-scale deployments. The JLL analysts noted that tenants securing space today are contracting for deliveries in 2027 and 2028.
Tackling the Frontier
The JLL report defined the data center frontier as “markets outside traditional mature hubs.” Such hubs include Northern Virginia, Dallas-Fort Worth and Silicon Valley. To that end, 64% of the 35 gigawatt (GW) national construction pipeline is in those frontier markets. Texas leads the way with 6.5 GW of capacity under construction. The Lone Star State could overtake Virginia as a dominant global data center market by 2030. Other states in the mix include Tennessee, Wisconsin and Ohio. Similar to Texas, these states offer plenty of energy resources and land, along with business-friendly operating environments.
Of this 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, “sufficient to support 35 GW of new or refreshed capacity globally,” the report said.
The Ongoing Power Problem
The takeaway is that data centers aren’t being built fast enough to meet demand. The main reason, as the report called it, was “significant infrastructure constraints.” In other words, a lack of power. JLL analysts said grid connection timelines average 4 years or more. As a result, major tenants must secure capacity years in advance. This is also why said major tenants are placing centers in the above-mentioned frontier markets.
Additionally, hyperscalers and other large operators are focusing on renewable energy and battery energy storage systems as potential solutions.
Investors and Capital
Despite bubble concerns, investor appetite for data centers remains robust, especially for “mission-critical digital infrastructure with long-term income streams.” Data center sales stood at $1.5 billion in 2025. Additionally, the market supported complex transactions such as forward sales, joint ventures and preferred equity arrangements. Debt markets also viewed data center assets favorably.
Additionally, mergers and acquisitions continued, including the $40 billion acquisition of Aligned Data Centers by a consortium of investors, the report said.
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