The data center industry experienced record growth in 2024, with unprecedented transformation driven by “historic absorption rates from hyperscale operators and the rapid advancement of artificial intelligence (AI),” according to a new Colliers 2025 report.
And while there are positive indicators ahead, the sector is facing challenges due to AI’s considerable power consumption, causing investors and operators to get creative.
AI Influencing All Aspects of Data Centers
Colliers’ findings show that AI is having an outsize effect on the data center process, from site selection to power supply to design innovation. However, the increased industry growth is the result of several factors, according to Raul Saavedra, vice chair, head of Data Center Advisory, Americas for Colliers.
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“AI is having a tremendous impact, but data center providers are also realizing the benefits of the economies of scale since the investment is so large,” he says. According to Goldman Sachs’ projections, more than $1 trillion in capital spending on AI-related infrastructure, including data centers, semiconductors and network upgrades, is expected in the next several years.
Colliers found that hyperscalers are no longer expanding incrementally and are instead scaling to an entirely new level. The traditional development model is changing to the construction of larger single-tenant campuses designed to meet AI’s vast power needs, which require more power per rack for liquid cooling, advanced power distribution systems, as well as AI-driven energy optimization to maintain efficiency at scale.
“Power is the most relevant headwind for the sector and there has been an incredible amount of absorption of the existing utility, which no one could have expected at the scale of the past few years,” notes Saavedra. “It will take time to address bringing more utility online and, as a result, the demand will be greater than supply.”
Energy Sources, Financing Further Affect Supply and Demand
Looking to address the power deficit and strained resources, investors and operators are turning to renewable energy sources to address demand, says Saavedra.
“I expect continued investment in alternative energy pursuits such as solar, wind and hydro,” he says, adding that there will need to be creative financing for the sector overall to meet the increased required investment, including the privately managed fund concept. However, Saavedra believes this will bring additional financing opportunities for investors.
“I appreciate the financing aspect because if you know the space and already have allocated funds, financing well-defined, triple-net leases with solid credit is a smart and strategic move."
With data center facility demand greatly outstripping supply last year, operators will have even more leverage in 2025, driving tenants to maximize the value of their existing and new-build footprints – all while confronting the power issues. Additionally, hyperscalers may need to explore more cost-effective energy alternatives to counter data centers’ rising rents.
“It will be a race to find large allocations of power and, as a consequence, we will continue to see emerging markets that were otherwise not considered,” says Saavedra. “And the near-term available power will then force markets that otherwise would not have been considered to now come online.”
For more insights and thought leadership from Colliers, click here.
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