As-of date: Mar 2, 2026 (Asia/Singapore). Disclaimer: This post is for information only. It is not financial advice.
Data Center Construction Slows for the First Time Since 2020
The AI boom stays real. Compute demand keeps rising, and big tenants still chase space.
But a key supply metric moved the other way. In primary US markets, CBRE reported that capacity under construction fell at the end of 2025 for the first time since 2020.
The CBRE numbers in one place
- Under construction at end 2025: 5,994.4 MW
- Under construction at end 2024: 6,350.1 MW
Source: CBRE, North America Data Center Trends H2 2025
Why you should care
“Under construction” is your near term supply pipeline. Cranes are up. Crews are booked. Contracts are active.
When this pipeline shrinks during a demand surge, you usually see one of two outcomes. Either supply stays tight and prices stay firm, or projects get stuck earlier in the process and arrive later than investors expect.
Bloomberg highlighted the same CBRE data and tied the slowdown to permit delays and power constraints.
Bloomberg coverage of CBRE findings
Permits and Power Now Decide Who Can Build
Capital still matters, but it no longer acts as the main gate. Developers now hit real world limits first.
1) Permitting and zoning slow projects down
Data centers look quiet from the street, but they draw industrial scale electricity. They also need heavy electrical gear, cooling systems, and backup power.
That mix triggers more hearings, longer reviews, and tougher conditions. Even when a city approves a project, delays can push delivery out by quarters or years.
In early 2026, Axios reported growing community pushback and large project delays tied to local concerns.
Axios: Local opposition creates roadblocks for AI boom
2) Power and grid interconnection became the scarce resource
Land and fiber used to anchor site selection. Now power does.
If a site cannot secure megawatts on a predictable schedule, it cannot host modern AI workloads at scale. Utilities also need time to build substations, upgrade transmission, and clear interconnection queues.
Reuters reported that Dominion Energy raised its multi year spending plan as data center load surged, and it disclosed nearly 48.5 gigawatts of contracted data center capacity as of December 2025.
Reuters: Dominion raises spending plan on data center driven demand
Demand Can Rise Even When Construction Falls
This looks contradictory until you separate demand from buildability.
Vacancy stays tight and preleasing stays high
CBRE reported record net absorption in 2025 and described demand that continues to outrun supply.
- Primary market net absorption: 2,497.6 MW in 2025 vs 1,809.5 MW in 2024 (CBRE)
- Average asking rate: up 6.5% year over year to $195.94 per kW per month for 250 to 500 kW needs (CBRE)
JLL also summarized how tight supply has become. It stated:
“Vacancy remains at a record low of 1% for the second consecutive year.”
JLL, North America Data Center Report Year end 2025
Projects can stall before they reach construction
Strong leasing does not guarantee fast construction starts. A project can sit in planning while it waits for permits, grid upgrades, transformers, and utility signoffs.
That is why you can see strong demand at the same time you see a smaller “under construction” pipeline.
The Map Shifts Toward Power Advantaged Markets
Traditional hubs grew because they combined fiber density, talent, and proximity to major customers. Now they also carry the most congestion, the most scrutiny, and the hardest power timelines.
Frontier markets take share
JLL reported that 64% of capacity under construction now sits in frontier markets. It also cited more than 35 GW under construction across North America.
What this shift changes
- Utilities benefit: new substations and transmission upgrades can drive multi year capital plans.
- Builders benefit: contractors that specialize in electrical and cooling work can stay busy even when timing turns lumpy.
- Operators benefit: firms with land and power secured in next hubs can deliver capacity while others wait.
What You Should Watch in 2026 and 2027
Track the bottlenecks, not the hype. These signals will decide the next leg of the cycle.
Five practical indicators
- Interconnection timelines: do utilities shorten queues or add capacity faster?
- Permitting outcomes: do moratorium proposals, zoning changes, or stricter reviews spread?
- Vacancy and preleasing: does vacancy stay near 1% and do tenants keep precommitting?
- Pricing: do rents keep rising, especially for large contiguous power blocks?
- Geographic mix: do frontier markets keep gaining share of new builds?
A simple mental model you can use
Treat modern data centers as power projects that happen to house servers.
When you think this way, the entire story makes sense. Permitting and grid access become the main gating factors, not money.
FAQ
Why did data center construction fall in 2025?
Projects ran into slower permits, tougher zoning, and longer power interconnection timelines. CBRE reported a decline in primary market capacity under construction at end 2025.
What does “MW under construction” actually mean?
It measures how much capacity is actively being built. It reflects near term supply that can hit the market once developers finish construction and commission power.
Does this mean AI demand is slowing?
No. Multiple reports show strong leasing and low vacancy. The slowdown points to build constraints, not weak tenant demand.
Why does power matter more than capital now?
You can raise money quickly. You cannot add grid capacity quickly. Substations, transmission upgrades, and interconnection approvals take time.
Which regions benefit from this shift?
Markets with faster power delivery and more land can attract new campuses. JLL highlighted frontier market growth and said 64% of capacity under construction sits there.
Who wins when supply stays tight?
Owners with secured power and permits can deliver capacity and capture higher pricing. Utilities and equipment suppliers can also benefit from grid upgrades and on site infrastructure builds.
Bottom Line
The decline in primary market construction does not signal shrinking AI demand. It highlights a new constraint: real world execution.
Permits and power now decide who can build. The winners will not be the loudest. They will be the teams that secure megawatts, clear approvals, and deliver capacity on schedule.
Links
External sources
- CBRE H2 2025 North America Data Center Trends
- Bloomberg coverage
- Axios on local opposition
- Reuters on Dominion and data center demand
- JLL Year end 2025 data center report
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