The Data Center Gold Rush Reshaping CRE: When, Where, and How

With AI adoption skyrocketing and data consumption accelerating at unprecedented levels, we are still on the cusp of explosive data center growth.

The decisions made today—where data centers are built, how power grids evolve, and which states offer the best incentives—will shape the commercial real estate landscape for decades.

Data centers are becoming the backbone of the digital economy, but with skyrocketing energy demands and shifting site selection priorities, the question is: who’s ready to capitalize, and who will be left behind?

Read on to learn:

• Just how explosive the growth of data centers is
• How location and incentives will decide the future hotspots
• How to keep up with grid-breaking power demands
• What these trends mean for the evolution of CRE

The Meteoric Rise of AI Data Centers

The numbers speak for themselves. Goldman Sachs Research projects a 160% increase in data center power consumption by 2030, driven largely by AI applications. McKinsey & Company forecasts that demand for AI-ready data center capacity will grow at an annual rate of 33% through 2030, with AI workloads consuming approximately 70% of total data center demand by the end of the decade.

As these facilities expand, they don’t just bring tech jobs. Building vast digital infrastructure from the ground up takes a lot of hands, meaning a whole new wave of opportunities for skilled labor.

And because we are still on the cusp of explosive data center growth, the states and regions that act as footholds now could define the next century of digital infrastructure, much like Silicon Valley did for tech startups.

The Emerging Hotspots for Data Centers

Several U.S. markets are seeing explosive growth in data center development, including Northern Virginia, Dallas, Phoenix, and Chicago. In 2023, AI-specific demand alone accounted for nearly 40% of all new data center leasing activity.

Virginia, in particular, has cemented its status as the world's top data center hub. Known as "Data Center Alley," the state hosts over 70% of the world’s internet traffic due to its robust fiber network, business-friendly policies, and relatively low energy costs.

It’s poised to be the backbone of the global digital economy.

Key Reasons Virginia Dominates the Data Center Market

• Business-Friendly Tax Incentives: Virginia offers one of the most competitive tax incentive programs in the country. The state's Data Center Retail Sales & Use Tax Exemption significantly reduces operational costs for companies investing in data centers.
  
  
• Low-Cost, Reliable Energy: Dominion Energy provides relatively inexpensive power compared to other major tech hubs. In 2023 alone, Virginia’s data centers accounted for 21% of Dominion Energy’s total electricity sales, highlighting the state’s ability to support large-scale digital infrastructure.
  
  
• A Strong Fiber Optic Network: Northern Virginia has one of the most advanced fiber networks in the world, giving data centers the connectivity they need to handle high-speed computing.
  
  
• Massive Investment & Job Creation: According to the 2024 Virginia Data Center Report, the sector generated $2.3 billion in state and local tax revenue in 2023 and supported 74,000 jobs in construction, operations, and maintenance.
  
  
• Infrastructure Upgrades Benefit Everyone: In Henrico County, new data centers have led to upgrades in local power grids, improving energy reliability for both businesses and residents.

With all these points, it’s not a big surprise that Big Tech is doubling down on Virginia. Leading tech firms are making massive investments to further cement Virginia’s dominance.

Recently, AWS (Amazon Web Services) announced a $35 billion expansion in 2023, reinforcing the state’s role as the global AI and cloud computing hub.

This surge in data center investment is transforming Virginia’s economy and infrastructure—but it also comes with a major challenge: power. As AI and cloud computing fuel unprecedented energy demands, the question isn’t just where data centers will be built but how the grid will keep up.

The Evolution of Power Needs

With such a power need, the challenge now is how to keep up with this demand while maintaining grid stability and sustainability. Data centers are among the largest electricity consumers globally.

Again, take Virginia as an example. In 2023, its data facilities accounted for 21% of total electricity sales.

This trend is not unique. States like Texas and Oregon, home to major data hubs, are seeing similar surges in power demand. And as artificial intelligence, cloud computing, and high-performance computing expand, this trajectory is only expected to steepen.

The problem is that the current grid infrastructure wasn’t built for this kind of strain.

Renewable energy sources like wind and solar, while crucial to sustainability efforts, are intermittent and land intensive. Meanwhile, traditional fossil fuel plants are being phased out in response to carbon reduction mandates. This leaves a widening gap in power generation—one that must be addressed if industries reliant on continuous, high-density electricity want to remain competitive.

This is where Small Modular Reactors (SMRs) could be a game-changer. The idea is that these compact, advanced nuclear reactors will offer a scalable, low-carbon alternative to conventional power sources.

By decentralizing energy production and reducing dependency on the traditional grid, SMRs may be the reliable, consistent solution for the industries that need it most—especially hyperscale data centers and manufacturing facilities.

Big Tech companies are already making moves in this direction.

Amazon Web Services, Microsoft, and Google have all invested in nuclear technologies, recognizing that long-term energy security will define the future of their operations.

As these industry leaders place their bets on SMRs, commercial real estate will have to adapt. The location of data centers, industrial parks, and logistics hubs may shift to take advantage of on-site nuclear power, reducing dependence on overstressed regional grids.

The implications are massive. Energy availability will no longer be a limiting factor in site selection, allowing for more strategic placements based on business needs rather than grid constraints.

We’re still (at least) a decade from tangible production, but this is where all of the top minds are putting their money and time. It’s worth paying attention to.

Follow the Power

As demand for AI and cloud computing skyrockets, the race for high-tech, energy-resilient real estate is just getting started. States and investors that adapt quickly will define the future of CRE.

Data centers and accommodating their real estate will become this generation’s gold rush. So, here are the trends that will play focal roles:

• Incentives Drive Site Selection: States with business-friendly tax policies, like Virginia’s Data Center Retail Sales & Use Tax Exemption, will continue to attract new facilities, influencing where CRE investments flow.
  
  
• Power Availability Is the New Location Metric: Data center developers are prioritizing sites based on energy reliability, not just traditional real estate factors like accessibility and workforce availability.
  
  
• Proximity to Data Centers Becomes a Competitive Advantage: Companies that rely on AI computing, cloud services, and IoT-driven supply chains will increasingly co-locate near data centers for reduced latency and operational efficiency.
  
  
• On-Site Energy Will Reshape Site Selection: On the other hand, the rise of Small Modular Reactors (SMRs) could allow data centers, manufacturing hubs, and logistics parks to be built in areas previously unsuitable due to weak grid infrastructure. Eventually in the future, this could decentralize CRE demand from traditional power-heavy metros.
  
  

The Big Picture for CRE

The next decade will see data center growth reshape commercial real estate in ways similar to how
E-commerce transformed industrial space. Investors, developers, and corporate tenants need to rethink site selection, energy infrastructure, and lease structures—or risk getting left behind in a rapidly shifting landscape.

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