Chapter 7

Data Centers

U.S. Real Estate Market Outlook Midyear Review 2026

5 Minute Read

Explore Local Market Outlooks

5 Minute Read

Explore Local Market Outlooks

Data Centers: Gordon Dolven and Pat Lynch [2:55 minutes]

Preference for 250+ megawatts with 125+ acres of land continues to drive site selectors in new markets. Power procurement timelines of 10+ years in some markets are pushing operators toward behind-the-meter solutions like natural gas turbines, small modular nuclear reactors and co-location at existing generation sites. These workarounds can shorten timelines to secure power, but electrical equipment backlogs and delays are keeping near-term supply shock risk elevated.
AI will remain the key driver of data center demand. Emphasis on private AI adoption at the enterprise level could have a major impact on edge data center use cases. Connected devices, proprietary AI models and robotics requiring latency sensitive workloads across many sectors are in the very early stages of adoption.
Counterparty and tenant risk remain a focus in 2026 and differentiate landlord strategies. While certain landlords and operators are willing to lease significant capacity to non-investment-grade tenants, others are opting to only serve the world’s largest technology companies. In the event of a slowdown, the bifurcation of financial health of operators will reveal itself.
Construction costs, including labor and materials, will continue to rise. High-density requirements are adding further pressure, with average costs of $14 million to $16 million per megawatt for the most demanding builds.

Source: CBRE Research, Q2 2026.

Source: CBRE Research, Q2 2026.

We expect accelerated greenfield development activity in parts of the U.S. where power delivery timelines have improved. Notably, Electric Reliability Council of Texas (ERCOT) and Pennsylvania-New Jersey-Maryland Interconnection (PJM) continue to receive interest from developers. As a result, it will remain challenging for competing utility territories to match power delivery timelines, which may impact developers’ interest.
We have raised our 2026 preleasing forecast for under-construction projects to 80% from 70%, supported by robust demand and reduced supply shock risk for construction projects in primary markets. Tenants will look to partner with operators and developers on new projects now set for delivery beyond 2028.
We raised our outlook for rent growth slightly, backed by a record-low vacancy rate of 1.4% in H2 2025. We expect average rental rates for 250-500kW requirements to be above $215 per kW per month. Larger requirements will price separately, but tenants across the size spectrum will continue to feel pricing pressure and attempt to renew space far in advance, if possible.
As power constraints in major markets remain challenging for grid interconnection timelines, West Texas, Indiana, Michigan, Pennsylvania and North Carolina will continue to attract developers.