Global data center demand surges despite supply and power constraints

CHICAGO, Jan. 13, 2025 – Artificial intelligence applications are rapidly expanding across industries, and the global data center industry plays a critical role in AI adoption and advancement. To meet the exponential data center demand, the sector will grow at a phenomenal pace in 2025. JLL’s 2025 Global Data Center Outlook explores how AI is not only driving demand but the development of more powerful and efficient data center infrastructure that balances computing power and sustainability.

Across the hyperscale and colocation segments, an estimated 10 GW is projected to break ground globally in 2025, while 7 GW will likely reach completion. Based on this current pace of under construction and planned developments, the global data center market will likely expand at a baseline 15% CAGR through 2027 – with the potential to reach 20%. Rapid expansion brings challenges, including demand outstripping supply and electricity development constraints in some markets. The industry also faces numerous opportunities such as the immergence of new technologies providing novel pathways for sustainability.

“The pace of AI innovation is not slowing down, and the data center industry must continue to adapt,” said Jonathan Kinsey, JLL EMEA Lead and Global Chair, Data Centre Solutions. “AI’s transformative power demands have already reshaped our world, yet its most significant and enduring effect may lie in how we rise to meet the substantial energy demands required to fuel this technological revolution. The results will fundamentally reshape data center design and operation.”

At the core of the AI revolution is the rapid advancement in semi-conductor technology. Over the past two years, GPUs have become substantially more powerful, leading to higher rack densities ranging from 40 kW to 130 kW per rack, with future chips projected to reach an astounding 250 kW per rack.

GPU innovation presents a significant hurdle: managing the heat generated by densely packed, energy-intensive GPUs. The necessity to keep this tech cooled and load variability stable, combined with new power usage effectiveness (PUE) regulations, will shift thermal management strategies toward liquid cooling as the standard for new data center developments. In the future, immersion cooling will become a common solution as GPUs surge past 150 kW.

Most new data centers are being designed to house a combination of both AI and traditional workloads. Though a significant driver, even optimistic adoption scenarios suggest that AI will represent less than 50% of data center demand in 2030, with traditional, lower-intensity workloads like data storage and cloud-based applications comprising most of the demand.

“While not every data center is or will be a specialized AI facility, all data centers – new and existing – can benefit from more energy efficient operations and improved technology integration,” said Andrew Green, JLL Regional Data Center Practice Lead, Asia Pacific. “Data center operators must contend with the demand for massive power needs while satisfying the need for more energy efficient facilities. AI is transforming data center management through predictive maintenance applications, which optimize energy usage, lead to longer lifespans for equipment and result in less down time.”

Forecasts suggest that global data center energy demand could double over the next five years. While data centers consume large quantities of power, they are one component of the complex global power challenge. Furthermore, data centers are expected to represent only about 2% of global electricity consumption in 2025. A variety of other factors like increasing EV adoption, machinery electrification and rising power consumption in developing countries also contribute to growing power demand.

Since data centers are often clustered together in metropolitan areas, significant bottlenecks in delivering power to new developments persist in some of the largest global data center markets like Northern Virginia, Tokyo and London. Additionally, these clusters are unevenly distributed across the globe, resulting in some countries and regions where data centers account for a considerable proportion of total electricity demand.

“Data center developers evaluate markets based on the availability of a few key aspects, including power, land, connectivity and tax incentives,” said Andy Cvengros, JLL Co-Lead U.S. Data Center Markets. “Scarcity is only half of the power story; transmission is the other part. The time it takes to erect transmission lines and substations to connect new data centers to the grid can be up to four years or more in some markets. Both established and emerging markets will see higher development levels in 2025, along with more developers exploring other energy solutions like natural gas and fuel cells.”

Being looked at as carbon neutral, large-scale nuclear power is emerging as a preferred alternative to traditional power, particularly for AI and high-performance computing applications. Companies worldwide are developing small modular reactors (SMRs), which, while still in the early stages, could offer a modular and scalable green energy power source at a fraction of the cost of large-scale nuclear. Though commercial deployment in the U.S. is unlikely until 2030 for a variety of reasons detailed in the report, JLL anticipates more SMR announcements this year.

Investor appetite for data centers will remain strong through 2025 due to demand for compute power and data storage, low supply due to power scarcity, attractive returns and growing excitement around AI’s potential. JLL anticipates data center development financing will have another record year in 2025, while global data center trading volume is likely to moderately increase in 2025.

“Data center activity has exploded over the last few years, with much of the demand geared toward single-tenant ground-up construction,” said Carl Beardsley, U.S. Data Center Leader, JLL Capital Markets. “Significant barriers to entry exist for new investors based on the amount of capital required as well as a longer development cycle. In 2025, we expect many opportunities for core investors to recapitalize the single-tenant data centers that continue to be built.”

M&A investment volume and megamergers will likely slow, but JLL expects an increase in joint ventures in 2025, particularly in developing countries as industry firms partner with regional groups to help navigate the local political, regulatory and business landscapes.

Despite challenges, including supply constraints and electricity limitations in some markets, the outlook for the data center sector remains highly favorable. The industry is poised for continued growth, driven by AI adoption, increased data processing demands and ongoing technological advancements.

Your data has never been more critical, and neither has your data center partner. From site selection and land acquisition to upgrades and facilities and energy management, JLL’s team of dedicated technical experts are trained and experienced in every phase of the data center lifecycle to help you scale, optimize and maintain efficiencies in your data center strategy. Our solutions enable your business to make higher-quality decisions and enter new markets with reduced friction through local market expertise, business intelligence, proprietary data and cutting-edge technology tools. To learn more, visit here.

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