One trend emerging from JLL’s Midyear North America Data Center Report is that developers continue to hit the power wall. This obstacle is stretching timelines in established hubs, encouraging developers to examine space in areas that were once outside of the industry’s main hubs.
Working the Energy Crisis
The power challenge raises the question of where developers can find the needed electricity to get new centers off the ground.
JLL Vice President of Data Center Strategy Sean Farney told Connect CRE that developers are experimenting with alternative power solutions to bypass grid constraints and improve development timelines.
Utilities are directing developers toward co-located generation and on-site battery storage, while microgrids are also a potential solution for addressing grid constraints. Those microgrids, however, remain under regulatory scrutiny.
Direct partnerships with utilities are also becoming more common.
Despite these efforts, long interconnection timelines remain a problem. Farney said new Commonwealth Edison projects in Chicago have four- to five-year delivery timelines, along with letter-of-credit commitments of approximately $46,000 per megawatt annually for 10 years.
“Grid limitations in Columbus, OH, are pushing users to secondary markets with available capacity,” he added.
Mining the Frontier
The reports refer to these secondary regions as “frontier markets,” noting that 77% of capacity under construction is located in such areas.
These markets offer several advantages in addition to greater power availability. They provide builder-friendly regulatory environments, enough land to accommodate large campuses, lower operating costs and room for long-term expansion.
Farney said grid constraints in Columbus are pushing overflow development toward the Ohio cities of Van Wert, Lima and Canton. At the same time, Southern Virginia and the I-95 corridor are attracting data center projects from nearby Loudoun and Prince William counties.
“While the spillover accelerates development, the scale of investment and structural advantages indicate permanent geographic transformation of the industry,” he said.
Upsides and Downsides
Farney said that data center developments can have a significant economic impact on these frontier markets, with large-scale developments expected to generate high-paying construction, engineering and IT-related jobs.
“Projects can generate an estimated $100 million to $200 million in local and state tax revenue in states like New York,” he said.
The downside is the ongoing misunderstanding and controversy surrounding data center development.
Farney said JLL has experienced a significant uptick in organized opposition and scrutiny over just the past six months. The report found that 79% of respondents support U.S. leadership in artificial intelligence. However, only 14% support data center development in their own communities.
“This paradox has made community acceptance a challenge, and it’s up to the industry to clearly communicate the many benefits of a local data center development, while dispelling long-standing myths about environmental impact,” Farney noted.
In some cases, developers are responding with greater transparency, engaging with community leaders and addressing concerns directly.
“The reality is that data centers do not belong in every community, but where projects and communities are compatible, collaboration between those communities, governments and the industry can enable responsible projects that deliver lasting benefits,” Farney said.
Preparing for the Future
The report explained that data center supply is unlikely to outpace demand. In contrast, the volume of data created and stored will continue to expand as technology becomes increasingly embedded in everyday life.
This means the need for additional data centers, especially in frontier markets.
“As we increase reliance on data centers for the music we listen to, the movies we watch, the memories we preserve, the banking system we move money with, and the first responder networks that save and preserve lives, we need more data centers with which to support our addiction,” he said.
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