Energy Shortages Are Threatening The Growth Of Industrial Automation

As the artificial intelligence-powered data center boom sweeps the country, creating unprecedented demand for electricity, the nation’s industrial developers find themselves fighting for power as the historically low-intensity sector becomes more automated.

Power has become a core factor in industrial site selection rather than just a utility consideration as developers are increasingly competing with data centers for access to electrical capacity, substations, transformers and interconnection queue positions. And there is no sign of a break from data centers’ ballooning demand for gigawatts. 

“For decades, industrial real estate was driven by highways, rail access, labor, rooftops — all those kinds of things,” said Alfredo Gutierrez, president and founder of industrial investment firm SparrowHawk. “Today, it's moving towards the need for power.”

Power-intensive industrial hubs can use as much as 10 times the power of traditional industrial facilities, according to a report from Oxford Economics released earlier this month. As other sectors undergo a similar electrification process, competition for power is likely to become even steeper. 

The latest five-year forecast of utility peak load growth increased nearly 600% last year, with data centers accounting for around 90 gigawatts of that jump in demand, according to a report from power sector consulting firm Grid Strategies. 

Expensive and time-consuming power studies have become necessities for industrial developers, as the sector is expected to need around 30 GW more power over the same span. 

As the industrial sector utilizes more electricity through continued automation, robotics and electric vehicle charging stations, the power demand for traditional low-intensity warehouses and logistics facilities is expected to grow. 

Power Hunger Games

The availability of power has become the biggest bottleneck for data center development as utility companies and transmission systems struggle to keep up with the speed and scale of AI-driven demand. The issue has accelerated over the past 16 months, as data center vacancy was at a record-low 1% at the end of 2025, according to JLL.

“The biggest problem that anybody has right now is the infrastructure is just not there,” said Chris Lewis, co-managing principal at Lee & Associates-Houston. “The United States, the world, really, doesn't have enough power, in my view, to perform and build these billions of dollars of hyperscale data centers.”

National electricity use is expected to increase by nearly 6% per year through 2030, according to Grid Strategies. And data centers account for around 55% of the nation’s forecast growth in peak load demand through 2030. 

Meanwhile, electricity costs have risen in many regions, further constraining investors and developers. U.S. electricity rates increased by more than 4% per year between 2019 and 2024, compared to just 0.2% annually during the previous five years, according to Oxford Economics.

Data center developers have begun exploring alternative power options like on-site natural gas generation, battery storage and miniature nuclear facilities to meet their needs. 

Electricity use by U.S. manufacturing and industrial properties has been growing since the 1980s, but that power consumption has intensified since 2023. Highly electrified logistics hubs like life sciences, cold storage, food processing and advanced manufacturing can use as much as 30 kilowatt-hours of power per square foot, according to Oxford Economics.

Lee & Associates has seen that growth in person. It determined that a new 6M SF industrial development would require 40 MW, compared with just 10 MW to 15 MW five years ago, Lewis said. 

“The industrial warehouse developers would be smart to build to a heavy power need, especially on the manufacturing side, because the technology is going to use more power,” Lewis said.

Renewed leasing demand for large-format industrial buildings that can be used for manufacturing and to scale automation processes has reignited construction activity across the country, according to a first-quarter JLL industrial report.

At the end of the first quarter, there were nearly 260M SF of industrial assets under construction, a 2.2% increase year-over-year. Nearly a third of that pipeline is concentrated in three of the fastest-growing states for data center construction — Texas, Pennsylvania and Georgia — with the former two among the leaders in big-box activity looking to scale automation, according to JLL. 

As more industrial facilities integrate technology and conveyor belts to become more efficient and less labor-intensive, the availability of power could become a bigger constraint for real estate investors and developers than even land costs, said Dakota Firenze, Oxford Economics' lead economist of real estate economics. 

“That's going to become increasingly something to consider in the underwriting process for these warehouse distribution centers and light manufacturing facilities of the future,” said Firenze, the report's author. 

Lewis estimated that as much as 25% of the industrial pipeline could be power-intensive facilities that will directly compete with data centers for electricity.

Even if some data center forecasts prove overstated, the scale of projected demand is large enough to potentially delay industrial projects in some markets.

Industrial developers now have to do power studies, capacity analyses and utility upgrade cost estimates for potential sites. And those processes can have implications on projects’ timelines and budgets, Lewis said. 

As soon as it becomes known that a site has untapped capacity, Gutierrez said it is immediately in high demand.

“Unfortunately, it's in high demand for data centers [and] it's in demand for manufacturing and for the warehouse distribution facilities,” he said.

SparrowHawk is pursuing a former light manufacturing plant in South Carolina that had been a bottling facility for Pepsi. The beverage maker brought in extra power to run the facility, so now that capacity is just sitting there.

“If that space ever becomes available, we can advertise that and we're going to land tenants, because we're going to be one of a few buildings in that situation,” Gutierrez said.

As technology advances and more sectors go through the electrification process the industrial market has experienced, Firenze said he expects the need for power to grow across asset classes. 

Office space could begin to incorporate more data center equipment, increasing its power needs. 

But Firenze said residential could be the next sector to compete heavily for power with industrial and data centers. New multifamily projects and large single-family neighborhoods are increasingly incorporating all-electric appliances and electric vehicle charging stations. 

“That's going to put a lot of load in the residential sector that we haven't seen before,” Firenze said.

Another problem facing industrial development is a shortage of skilled labor. The data center boom has monopolized skilled workers across the country. 

Paul Paleracio, a regional project executive for North Texas contractor McGough, said he has seen a lot of the region’s skilled workforce head to rural areas to work on data center projects. 

However, that is most likely due to those data centers having backers with deeper pockets than the average industrial project. 

“It's not that data centers have a lot of specialties. It's just … they can afford to spend more,” Gutierrez said. 

Looking Ahead

Since older industrial properties with existing substations or heavy power service are becoming more valuable, markets with available gigawatts are outperforming those with lower land costs, Lewis said. That is why developers have turned to upgrading older industrial buildings with existing heavy power infrastructure to allow for automation, robotics and AI integration. 

“In many cases, existing infrastructure is now more difficult to replace than the building itself,” Lewis said.

Since the nation’s existing industrial footprint can’t be moved closer to power lines, the electricity needed for those facilities will have to be delivered in other ways. 

Firenze said the federal government needs to partner with the private sector to increase the nation’s power supply. 

“There needs to be both private and public sector investment in electricity generation for not just data centers or these warehouse distribution centers but just across the board,” Firenze said.

Almost 100 GW of new data centers are expected to be constructed by 2030, according to JLL's 2026 global data center outlook. But grid limitations threaten to slow those growth trajectories, forcing data centers to turn to alternative power generation strategies and integrated batteries to continue scaling.  

Competition for power could benefit cities in the Midwest that had been home to traditional manufacturing facilities, Gutierrez said.

“They're going to be wanting to go out to secondary settings where the municipalities may be forward-thinking, because this is a municipality issue, not an industrial issue,” Gutierrez said. 

The competition for power is adding pressure to the market like never before. JLL’s data center outlook says the sector’s expected growth will require energy innovations to reduce power grid constraints. 

Gutierrez said he believes that pressure could ultimately accelerate the next generation of energy creation.  

“Data centers tend to be around a lot of smart people,” Gutierrez said. “These engineers that are getting paid very well to work for the technology companies … are going to figure out a way to make energy more readily available and efficient.”