Trends Shaping the Data Center Industry in 2025
The data center industry is undergoing a period of rapid transformation, driven by the accelerating demand for cloud computing, technological advancements, and sustainable energy solutions. Jeff Kanne, President & CEO of National Real Estate Advisors and Vice Chairman of Sabey Data Centers, highlights the critical trends that will define the industry’s trajectory in 2025 and beyond.
Technological Expansion
The expansion of cloud computing continues to drive record-breaking demand for data center infrastructure. Hyperscale cloud providers and enterprises alike are racing to secure high-performance data centers that support increasingly complex workloads. This demand has only been further accelerated by AI, which requires specialized infrastructure, high-density GPUs, and advanced cooling solutions. Although AI dominates the headlines, the growth of cloud-based digital ecosystems serves as the foundation for the evolving data center landscape.
Energy Constraints
This unprecedented growth puts immense pressure on power availability, a key constraint in data center expansion. Goldman Sachs now predicts a 35% increase in U.S. electricity demand over the next decade, a sharp contrast to the 8% growth seen over the previous 20 years.1 Securing reliable, sustainable power has become a top priority for operators, while tenants are increasingly focused on accessing space with cost-effective, carbon-free energy sources. With rising interest in carbon-free energy and emerging innovations, the industry is moving swiftly to mitigate risks related to power supply and costs.
Leasing Market Dynamics
The surge in cloud computing and AI has led to record-high leasing demand, reducing vacancy rates to historic lows. Since 2021, data center demand has grown at an annual rate of 10%, while rental rates have increased by 48%.2 This supply-demand imbalance has created favorable conditions for operators to secure premium lease agreements and capitalize on rising digital infrastructure needs.
Advancing Nuclear Innovation
As data center operators seek long-term power solutions, nuclear energy is gaining traction as a viable, carbon-free alternative. Its ability to provide consistent, large-scale, cost-effective power makes it an increasingly attractive option for meeting high energy demands. As a result, a growing number of operators are actively exploring this technology.
TerraPower, a leading nuclear innovation company, is pioneering the deployment of advanced nuclear technology in the U.S. Its Natrium microreactors highlight the potential of next-generation nuclear power. Learn more about Sabey Data Center’s strategic partnership: TerraPower Forms Strategic Partnership with Data Center Developer for Wide-Scale Deployment of Natrium® Plants
Decentralization
With power constraints limiting growth in traditional data center hubs, operators are increasingly turning to rapidly expanding markets such as Austin, Salt Lake City, and the Pacific Northwest. These regions offer more accessible power resources, established network infrastructure, and favorable regulatory environments, making them attractive locations for data center development.
For more on data center site selection considerations, check out this article: Decoding Factors Driving the Data Center Industry’s Strategic Site Selection.
Next-Generation Cooling Technologies
The rise of high-density computing has necessitated innovations in cooling technology. Liquid and immersion cooling technologies are gaining momentum as they offer advanced heat management, enabling compact and energy-efficient designs.
Operators embracing these technologies are reducing energy consumption and improving sustainability metrics. Check out our guide to learn more: Five Things to Know About Liquid Cooling in Data Centers.
Regulatory Considerations
Regulatory oversight is intensifying as data center power consumption and environmental impacts draw public scrutiny. Stricter policies on energy consumption, emissions, and sustainability practices are challenging operators to adopt greener solutions while maintaining compliance.
Transparency and proactive engagement with regulatory bodies and local permitting authorities are becoming vital strategies for building public trust and securing long-term success. Navigating this evolving landscape will require both innovation and accountability.
Looking Ahead
The data center industry is at a pivotal moment, defined by remarkable opportunities and equally significant challenges.
- Goldman Sachs
- DataCenterHawk, McKinsey, BofA Global Research, and CBRE