Demand for data centers continues to skyrocket, even outpacing a record construction pipeline, according to a pair of recent reports from real estate giants JLL and CBRE. But where these new data centers are being built is changing, with a growing share of inventory moving out of Northern Virginia and the industry’s other traditional hubs.

The artificial intelligence infrastructure arms race shows no signs of slowing down. Demand for data center capacity in North America hit record levels in the first half of this year with 25 gigawatts of absorption, according to a JLL report published last month. That’s double the demand level a year prior and five times that of the first half of 2024.

“We’re witnessing demand levels that continue to exceed even industry insiders’ expectations,” Andy Cvengros, the co-lead of JLL's U.S. data center markets team, said in a statement.

This demand wave continues to outpace the industry’s ability to build new capacity despite an unprecedented data center construction boom that is still accelerating.

According to JLL, more than 66 gigawatts of data center capacity is under construction across North America, enough to more than double existing inventory. It’s a pipeline the report’s authors call “extraordinary” — representing more electricity demand than in all of Germany.

The scale of the data center industry’s expansion is echoed in a separate report published last month by CBRE. Looking only at North America’s eight largest “primary” data center markets, the report found that capacity under construction climbed 24.8% in the first six months of this year to a record high, surpassing the previous record by more than a gigawatt.

The construction pipeline is now roughly 12 times larger than it was in 2021.

But tenants, led by hyperscalers and AI firms, are snapping up this new inventory as fast as it can be built, data from both brokerages show.

Despite the flood of new inventory, vacancy across North America sits at just 1%, according to JLL. Within primary markets, CBRE reports vacancy falling to a record low of 1.4%, down from 1.6% a year prior. Available inventory today is largely limited to small, fragmented blocks of capacity, not the dozens or hundreds of megawatts that major tenants are looking for.

The vast majority of new data center capacity today has been spoken for long before it comes online, with preleasing activity continuing to accelerate. According to CBRE, there are commitments on more than 80% of all under-construction capacity across North American primary markets, with less than 1.5 GW of future capacity remaining available.

Declining vacancy rates in primary markets reflect the fact that it is becoming increasingly difficult to build data centers in the industry’s traditional hubs, where a shortage of available power and community opposition to data center projects have become significant constraints on growth.

These factors are also dramatically redrawing the data center development map, as data center builders increasingly eschew the industry’s traditional hubs — places like Northern Virginia, Dallas, Silicon Valley and Chicago — for “frontier” markets where few data centers were built previously. It’s a geographic shift that brokerage shows has accelerated significantly in the past six months.

Frontier markets now account for 77% of the industry’s construction pipeline, up from 64% in the second half of last year, according to JLL.

Texas has been the primary beneficiary of this shift. A previous JLL report projects that the state could overtake Virginia as the world’s largest data center market by the end of the decade. But the Lone Star State is far from alone in seeing a flood of development in areas that were data center hinterlands less than a decade ago.

“The geographic transformation of this industry continues its rapid evolution,” JLL Vice President of Data Strategy Sean Farney said in a statement. “Energy-rich, build-friendly markets like West Texas, Ohio, Louisiana and the Carolinas have seen massive investment in recent years.”

CBRE’s data suggests a similar shift is also underway among the industry’s largest markets. For the first time, Atlanta overtook Northern Virginia as the top market for data center construction in the first half of this year as growth slowed in the longtime industry mecca due to mounting land constraints and increasingly difficult permitting.

These dynamics are expected to persist, according to CBRE, with power availability and the speed of infrastructure delivery remaining the primary drivers of site selection.

Speaking on a webinar following the report’s publication, CBRE First Vice President Holly Lahd said the next data center boomtowns are likely to emerge in the Midwest and Mountain West, where a diverse mix of utilities has led to developers having success finding the large blocks of power needed to move hyperscale projects forward.

“The reason for this is that there’s a variety of different utilities in the market … and you see different business models and different requirements and how eager they are for large loads, particularly in rural areas,” Lahd said. “They also have multiple paths to power procurement.”