Data Center Construction Boom Redraws US Land, Loans and REITs

The view from above

For most of the AI boom, the main evidence of its size came from earnings calls and capital-spending guidance. Satellite and aerial imagery now shows it directly. Before-and-after images from a late-September Washington Post analysis show forest, farmland and desert in Tennessee, Texas, Arizona, Wisconsin, Virginia and New Mexico replaced by long, warehouse-like buildings.3133 One example is a site near Memphis. Five years ago it was a single warehouse in woodland. Today it holds xAI's Colossus 2, which the Post calls the largest operating data center in the country.31

The Post's figures come from the tracking firm Cleanview. About 100 hyperscale facilities, meaning sites that draw at least 100 megawatts at peak, are running in the US. Another 120 are under construction and 460 more are planned.31 The land-use findings matter most for property markets. Only about 40 percent of existing hyperscale sites were built on previously developed land. A third went up on farmland, and the remainder on forest and shrubland.31 A David Adams of California State University, Fullerton, quoted by the Post, explains the shift. Older data centers clustered in wealthy metro areas with good power and fiber. AI facilities need far more electricity, which pushes them toward cheaper rural land that is still near fiber lines.32

A New York Times aerial survey a week later reached the same conclusion from a different angle. Citing Cleanview, it reported that 180 data center buildings were completed in 2025, up 170 percent from 2021, with nearly 50 in Virginia alone. Another 88 were finished in the first part of 2026.35 The Times also highlighted an estimate from Columbia economist Stijn van Nieuwerburgh. Annual AI construction spending could exceed 3 percent of GDP from 2025 through 2032, a larger share than the country spent each year building railroads, the electric grid or highways.35

How much of the pipeline is real

The imagery is persuasive, but the reporting splits on one question: how much of the announced pipeline will actually get built. Cleanview's chief executive, Michael Thomas, told the Times he sees no sign of a slowdown. He described the market as a "Mad Max" scramble for power and equipment.35 Other trackers are more cautious. Bernstein Research reviewed thousands of North American projects using data from Aterio, which monitors construction through satellite imagery and permits. It concluded that only about 35 percent of announced capacity, roughly 170 of nearly 500 gigawatts, is likely to be built.38 Aterio reports that 30 to 40 gigawatts are announced each month. Only about 7 gigawatts begin construction monthly, and 2 to 3 gigawatts come online.38

Delays point the same way. Geospatial firm SynMax estimates that nearly 40 percent of projects due this year could miss their targets by more than three months. TD Economics found that of 16 gigawatts announced for 2026 delivery, only about 5 were under construction by summer.39 The independent Compute Atlas dataset counts 493 gigawatts of announced capacity against 61.6 gigawatts operating, a ratio of about 8 to 1. About 129 gigawatts of that is under construction.

The best reading is that both sides are right about different things. The physical build-out shown in the imagery is real and still speeding up. The headline pipeline numbers, however, contain a lot of speculative announcements, which Business Insider called "bragawatts."38 Kevin O'Leary's Stratos project in Utah shows the gap. The Times reported its planned acreage was cut in half after local opposition.35 Bernstein estimates that only about 3 percent of the capacity announced by O'Leary's company will be built.38

A landlord's market

For the listed real estate investment trusts that own this kind of capacity, scarcity is the main selling point. CBRE measured vacancy across eight primary North American markets at 1.4 percent in the first half of 2026. More than 80 percent of capacity under construction was already preleased. In Northern Virginia, vacancy is 0.2 percent.2 JLL uses a different method and puts North American vacancy at 1 percent for a third straight year, with 95 percent of 66 gigawatts under construction pre-committed.2 The two firms differ in scope, not in what they conclude.

Digital Realty is the clearest beneficiary. It reported 29 percent revenue growth in the second quarter, cash renewal rents up 25.4 percent, and a signed-but-not-commenced backlog of $1.4 billion at its share.11 The company has 1.4 gigawatts under construction at a total cost of $20 billion. That pipeline is 63 percent preleased, at an expected stabilized yield of 11.5 percent.14 Equinix depends more on interconnection than on large hyperscale leases. It posted a record 9,700 net interconnections in the quarter and plans $5 billion to $7 billion a year in capital spending through 2029.12

The strong headlines come with costs. Digital Realty paid for part of its growth by selling shares through its at-the-market program and has guided to $4.25 billion to $4.75 billion in net development capex.11 Its quarterly dividend has stayed at $1.22 since 2022, even as core FFO has risen.14 Customer concentration is also a risk. Management called hyperscale leasing "episodic."16 Nareit put the implied cap rate for listed data center REITs at 5.74 percent in the second quarter, up from 5.48 percent in the first. That small rise suggests investors are not paying unlimited prices for the growth story.17 At REITWeek, Chilton noted that local resistance to new development could raise rents on approved, stabilized campuses while also threatening future pipelines. Chilton says it gives unapproved projects little value.19

Loans follow the leases

Commercial real estate lending is where the boom meets tightening credit. Banks committed about $121.9 billion to data center properties in 2025, with an average loan size of $1.2 billion, according to S&P Global Ratings data cited by Commercial Observer.21 Data center CMBS reached $4.9 billion in the first half of 2026, or 9 percent of single-asset, single-borrower issuance.21 Securitizations outstanding grew from about $4 billion in 2020 to $61 billion in 2026.23

Lenders, though, are being more selective. Newmark's Chris Lozinak says construction lending is moving from bank balance sheets toward private credit. He adds that it depends almost entirely on preleasing to established hyperscalers, and very little is built on spec.21 Deal sizes show why big funds want in. Related Digital and Blackstone raised $16 billion in PIMCO-led construction financing for an Oracle-leased campus in Michigan.21 The broader market is less generous. With the 10-year Treasury above 5 percent for the first time since 2007, bond buyers have become more discriminating.21 The Fed's October Beige Book described commercial real estate credit tightening in several districts. Atlanta was an exception, where construction and land development lending grew because of data center projects.28

There is also a structural point. Lawyers and lenders note that many of these deals now look more like project or infrastructure finance than conventional mortgages, because they cover on-site power plants and equipment.21 The Urban Institute raises a related concern. Data center construction loans can count toward the same bank concentration limits as homebuilding loans, so in some cases the two may compete for the same lending capacity.22

Office's odd new tenant

The office market is being affected in two ways. In the Census Bureau's statistics, data centers are counted inside the private office construction category. They now make up about 63 percent of that spending, at an $84.95 billion annual rate in August, compared with about $45.8 billion for general office buildings.2 Any rise in reported "office" construction is therefore mostly data center activity. Office fundamentals themselves are improving only slowly. Cushman & Wakefield reports national vacancy of 19.8 percent, down 30 basis points year over year.4

That vacancy has produced a small but telling trend: converting obsolete offices into compute facilities. In Chicago, Legacy Investing and GI Partners are spending $300 million to $400 million to turn the former Cboe headquarters into a 33-megawatt data center. They expect rents up to four times the downtown office average.1 The building's history shows that power is now the scarce asset. Previous owners bought it for $12 million in 2024, secured more electrical capacity from the utility, and sold it for $40 million in late 2025.1 C-PACE financing has supported similar conversions of a former newspaper building in Kansas City and a former corporate campus in Houston.25

This should not be overstated. JLL's Peter Skae notes that most office buildings lack the power density and ceiling height data centers need, and he estimates that 95 percent of municipal buildings proposed for conversion would not work.1 Conversions will rescue only a few obsolete towers. They will not fix office vacancy.

The reading

Taken together, the imagery and the market data describe a real estate cycle with a very narrow base. Demand is concentrated among a few creditworthy tenants. Financing depends on their signatures, and land value depends on access to power more than location. Owners of stabilized, powered campuses, along with the lenders backing them, are well placed. Developers holding land without permits, power or tenants face a capital market that is getting more skeptical. The satellites show what has been built so far. The gap between the announced pipeline and actual construction starts is the better guide to how much more will follow.