Why the Explosive Growth of Data Centers Matters

Key Growth Drivers Aren’t Slowing

While the growth of the data centers is, by nature, a complex topic with many interconnected factors, only a handful of key drivers are responsible for quickening the industry’s already torrid pace.

Cloud Computing: The shift from on-premise IT infrastructure to cloud-based services requires large-scale data centers to host and manage data. As businesses of all sizes migrate to the cloud, dedicated facilities must expand to meet these needs.

AI and Machine Learning: Advanced AI algorithms require significant computational power, driving demand for high-performance data centers. The recent explosion in generative AI applications has further accelerated this trend. Goldman Sachs analysts project that power demand in the global data center market will reach 84 gigawatts by 2027, with 27% of the usage coming from AI.

Digital Transformation: The high bandwidth and low latency of 5G networks has significantly increased demand on data centers. As industries implement more digital solutions, connected devices generate substantial data that needs processing. This is especially true in manufacturing, healthcare, and initiatives where real-time data processing is essential:

• In manufacturing, timely analytics enable predictive maintenance systems that prevent costly equipment failures and production delays.
• In healthcare, immediate processing of patient monitoring data allows for life-saving interventions and personalized treatment adjustments.
• Smart city initiatives rely on instant data analysis for everything from traffic management that reduces congestion to public safety systems that can respond to emergencies within seconds.

Strategic Locations Serve Varying Models

Data centers differ in ownership, location, and capabilities such as latency, security, and scalability. Ownership generally falls into three models: Enterprise (privately owned by companies for their specific needs); Colocation (facilities where companies rent space and share infrastructure costs); and Hyperscale (operated by tech giants like Google, Amazon, Microsoft, and Meta to accommodate rapid demand increases with sophisticated technical capabilities).

“A lot of developers are looking at non-traditional locations to develop data centers where there’s power available, such as rural areas outside established tech hubs,” says Mark Schultz, business unit leader for the Data Center market at Gray. “Everybody’s trying to strike the right balance between reliability, efficiency, and resource availability.”

Limited Resources Threaten Expansion

With AI proliferation, demand for hyperscale capacity is projected to increase significantly. McKinsey estimates that demand for AI-equipped data centers will grow to around 70 percent of total data center demand by 2030. The CBRE U.S. Real Estate Market Outlook 2025 predicts the number of data centers under construction to reach record highs in 2025; however, many projects face delays waiting for power infrastructure upgrades.

“Power is a major limiting factor to sustaining the growth rate of data centers,” says Schultz. “We’re approaching the point where it’s feasible for developers to generate their own power, potentially using on-site gas or small nuclear reactors.”

Supply chain disruptions are exacerbating power supply challenges. Critical components like generators, transformers, and electrical switchgear face extended lead times. For example, procuring transformers can take up to 210 weeks for larger units—a significant increase compared to 50 weeks in 2021.

The industry also faces workforce scarcity that further constrains growth. “Electricians are probably the most critical need, but there’s a shortage of almost every craft in construction,” Schultz explains. “We never have enough pipe fitters, carpenters, concrete persons, electricians, elevator technicians, and other tradespersons.”

Expansions Help Drive Economic Growth

The increased demand for data centers is transforming commercial construction and reshaping local economies. In 2014, only 5% of office construction spending was for data centers. By 2024, that share increased to 32%, and is predicted to approach 40% by 2028, representing a fundamental shift in commercial real estate priorities.

As reported by CBRE, “Data-center-related jobs have increased by 20% nationwide to 3.5 million from 2.9 million between 2017 and 2021, far exceeding the 2% rise in overall U.S. employment, according to accounting firm PwC. Each direct job in the U.S. data center industry helps to create 7.4 ancillary jobs throughout the U.S. economy.” This multiplier effect makes data centers powerful economic development engines for the communities where they’re located.

As data centers continue to reshape the construction landscape and digital infrastructure, their economic impact extends far beyond their physical footprint. The industry now stands at a crossroads where innovation in power generation, workforce development, and regulatory frameworks will determine whether data centers can sustain their remarkable growth trajectory meeting the ever-increasing demands of our digital world. Finding solutions to these challenges will be essential not just for the industry itself, but for the continued expansion of the global digital economy.