Full Breakdown
U.S. Data Center Construction Faces Significant Slowdown Amid Power and Regulatory Challenges
2/26/2026, 8:59:56 AM
Decline in Construction Amid Rising Demand
The construction of new data centers in the United States has experienced its first decline since 2020, despite an increasing demand for artificial intelligence (AI) computing capacity. According to a report by CBRE Group Inc., capacity under construction fell to 5.99 gigawatts (GW) at the end of 2025, down from 6.35 GW in 2024. This slowdown is attributed to delays in permitting, zoning approvals, and securing adequate power supply, which are reshaping the landscape of data center development.
Shifting Development Patterns
As traditional data center hubs like Northern Virginia face mounting local opposition and scrutiny over resource usage, developers are increasingly looking to markets with more available land and power. Notably, construction activity surged by 169% in Chicago and 15% in Dallas-Fort Worth, while Northern Virginia saw a 29% decline in ongoing projects. The overall vacancy rate in primary markets reached a record low of 1.4% by year-end 2025, indicating a tight market despite the construction slowdown.
Power Supply Challenges
The rapid expansion of data centers is placing unprecedented strain on U.S. electricity grids. Major technology companies, including Microsoft, Amazon, Alphabet, and Meta, have announced plans to invest over $600 billion in AI infrastructure in 2026 alone. However, this ambitious growth is hindered by severe power infrastructure bottlenecks, including turbine shortages and slow grid expansion. The International Energy Agency (IEA) predicts that electricity demand will rise by nearly 2% annually between 2025 and 2030, primarily driven by data center expansion.
PJM Interconnection, the largest power grid operator in the U.S., has warned of potential power supply shortfalls of up to 60 GW in the coming decades due to accelerated demand growth from data centers. Similarly, the Electric Reliability Council of Texas (ERCOT) reported that 226 GW of large-load projects, mainly data centers, are seeking connections to the grid, which is three times the current total U.S. data center capacity.
Official Statements & Responses
Illinois Governor JB Pritzker has sought to temporarily halt incentives for data centers to manage rising power costs, reflecting growing concerns about the environmental impact of such projects. President Donald Trump, in his recent State of the Union address, emphasized that tech companies "have the obligation to provide for their own power needs," suggesting that they should build their own power plants to mitigate rising electricity prices.
Criticism & Opposition
Local opposition to large-scale data center projects has intensified, particularly in areas like Northern Virginia, where residents are increasingly concerned about the environmental and resource implications of these developments. Protests have emerged against projects such as an Oracle Corp. site in New Mexico, which has faced scrutiny for its potential environmental impact.
Conflicting Reports & Gaps
While CBRE reports a decline in construction activity, other sources indicate that the demand for data centers remains robust, with new tenants absorbing a record 2.5 million gigawatts in 2025. This discrepancy highlights the complex dynamics at play in the data center market, where demand continues to surge even as construction slows.
What's Next
The future of data center construction in the U.S. will likely hinge on resolving power supply challenges and regulatory hurdles. As the demand for AI-driven infrastructure continues to grow, the industry faces critical decisions regarding energy sourcing and grid investments to support this expansion.
