Inside the AI Data Center Economy: Balancing Energy, Capacity & Job Creation

SPEAKER_1 (0:00)

Let's turn our attention back to Data Center Real Estate, and welcome in our next guest, Gordon Dolven, who's the head of data research over at CBRE. Good afternoon to you, Gordon. Thank you so much for your time. I was just speaking to a commercial real estate investor who said that data centers are the only sector that's really insulated from higher rates, which is really the conversation right now. Is that what you're all seeing?

Gordon Dolven (0:22)

Yeah, demand has been robust for the last five years. I think you could characterize things in terms of three different demand drivers that we've been seeing from the occupiers or tenants in these data centers. So you're seeing it at the application level. That means every time you press a button on your phone and interact with an application on your device, you're seeking and talking to and interacting with a data center and some across the country. The second is cloud service providers continue to grow their products and lines of businesses. So that's the second wave on more of an enterprise or B2B level. And then lastly, it's the AI large language model build out that we are in the midst of across the country.

SPEAKER_1 (1:03)

Yeah, which as I said, has caught a lot of attention this week with former researchers who've been coming out and raising some of the fears around. This obviously, some would say even killing us in the future. I mean, there've been some pretty stark warnings to say the least. But I'm wondering then, you can't have somebody on who's looking at commercial real estate space, particularly in data centers without wondering what you're hearing or seeing about the pushback.

What is the situation out there? I suppose it's state-by-state right now.

Gordon Dolven (1:38)

Here's what we do know, over the last five years, the construction pipeline has grown to the tune of 15x or 1,500 percent in terms of the supply side and what we're seeing in the pipeline for growth. Then almost as impressive as that on the demand side, what we're seeing is that it's all-time low vacancies and 80 percent of that construction pipeline is already spoken for entirely.

Going back five years, you would have seen roughly a 50 percent pre-leasing margin in terms of what is under construction and what is spoken for. That's up to 80 percent and then that pipeline has grown by 15x. Tremendous growth not only on the supply side, but also on the demand side.

SPEAKER_1 (2:19)

What are you seeing as far as geographically where the biggest opportunity is right now?

Gordon Dolven (2:25)

Yeah, the major markets still are retracting enterprises of all sizes and shapes across many different industries. But what we're seeing is that developers and operators, you used to bring the power to the site. Now you have to bring your data center site to the power. So we're talking about new markets like Louisiana, Mississippi, Pennsylvania, Indiana, Wisconsin. These would not have been major data center markets 10 years ago. But because we're building data centers on hundreds of acres of land, requesting hundreds of megawatts, if not gigawatts of power, all of a sudden these markets become attractive for developers in 2026

SPEAKER_1 (3:03)

Interesting. So if power availability is becoming a decisive factor in where you're selecting your site, what is that going to mean for the future then? If you just physically run out of space in those locations.

Gordon Dolven (3:19)

So across the US broadly, it's characterized as we don't necessarily have a power generation issue. We do have a transmission issue in terms of transmitting those electrons. So you're seeing site selectors and developers across the country look for pockets of areas of the country that previously may have been industrialized or manufacturing hubs, and they may have seen a lot of offshoring occur. And so there's existing electrical infrastructure in some of these communities that has not been utilized for decades. All of a sudden, you're seeing a data center developer walk into a community and really being a saving grace for a stranded substation in a local community that once had an industrial boom.

SPEAKER_1 (4:00)

Interesting. I guess another part of the national conversation, a lot of what I've been hearing about anecdotally, and I was actually having a fascinating chat on one of our previous shows, was about the workers.

Obviously, you're talking about data centers going into some of these communities, people getting paid pretty well, you could say.

Six-digit salaries straight out of college or not even straight out of college, even skipping that part altogether. You're talking about blue-collar type jobs that hadn't previously been attractive. What are you seeing as far as where they're getting the workforce? Local or is it across the country? Is it very selective in the type of people that they're looking for?