Driven by the increasing demand for digital infrastructure, the data center market is experiencing unprecedented growth. As of 2024, the global data center construction market was valued at $91.86 billion, and it is projected to more than double by 2030. This expansion is due to large-scale technology investments and the need for greater computing and storage capacity, supported by billions in capital flowing into real estate, hardware, and power infrastructure. Trillions of dollars in global capital expenditures are expected across the industry through the end of the decade, with the United States accounting for a substantial share while international markets also see rising activity.
The following key takeaways highlight data center market growth, real estate considerations, energy and sustainability pressures, and the industry’s opportunities and risks for private equity.
Market Momentum
Demand for digital infrastructure is surging as enterprises shift workloads to the cloud and hyperscale providers, fueling a “data center explosion” across markets. Artificial intelligence (AI) has emerged as the primary driver of new capacity needs, with workloads expected to expand rapidly through 2030. The massive data requirements for connected devices and digital solutions is also further elevating capacity requirements for storage and processing.
This momentum spans the full stack of data center investment, including powered shells and facility infrastructure (such as power systems, cooling, and connectivity), as well as network, storage, and compute resources, each creating distinct supply-chain and capital needs. Deployment models are becoming more diverse, with enterprises shifting away from on-premise sites toward colocation, while cloud demand is increasingly concentrated among a few major providers.
The United States firmly leads the way globally in installed sites and near-term development, with more than 2,000 data centers projected to be constructed between 2025 and 2030, even as Asia Pacific and the Middle East begin to ramp up efforts. Hyperscalers remain the largest single source of demand, building out existing sites to increase capacity as well as constructing new large-scale data centers. Forecasts point to a construction market surpassing roughly $214 billion by 2030 at around 15% annual growth, embedded within an almost $7 trillion ecosystem spend across facilities, power, networks, servers, and storage through the end of the decade.
Real Estate Drivers
Data center development begins with real estate considerations, and location is critical. Projects cluster in hubs with strong fiber infrastructure, reliable or expandable power capacity, and lower natural disaster risk. Large parcels are preferred to support phased development and spread the upfront costs of utilities across multiple buildings. Zoning can often present hurdles, as existing codes may not specifically address data centers, requiring annexation or ordinance changes to allow use by right.
Diligence on title, survey, and easements is essential, including securing fiber and electricity access. Post-construction, roadway traffic is lighter than typical warehouses, but generators and cooling systems can create noise, requiring buffers or berms to reduce sound for nearby communities. Security is also paramount, with hyperscalers often imposing strict limits on third-party access, even with landlords when the data center operator is operating as a tenant under a lease.
Utilities are a challenge for facilities as well. Data centers require highly reliable power and significant cooling water, with the need to account for average and peak demand. Developers often add water towers or other infrastructure to handle demand spikes and are exploring technologies to reduce water intensity, though these can be costly.
Energy & ESG Pressure
In the United States, power availability is gaining precedence in siting and deal strategy, with some operators prioritizing firm supply over green goals. Backup generators and batteries are used to meet peak demand, and some offtakers are facing a tension between availability and sustainability as overall energy demand grows.
European policy is moving in the opposite direction, however, where forthcoming rules are expected to require a defined share of green power and recycling of waste heat, contributing to a rise in joint ventures between data center sponsors and energy providers that can deliver low-carbon supply. Similar collaborations are emerging in the United States, and sustainability remains part of procurement conversations even as near-term reliability remains the preferred option for many operators.
Demand growth is also significantly reshaping power planning. After years of a relatively flat power demand curve, projected data center demand is rising sharply, prioritizing three selection criteria for power technologies: availability, reliability, and sustainability. In practice, many large facilities are turning to readily available gas-fired generation for near-term needs while exploring longer-term low-carbon options, including nuclear, to satisfy corporate emissions targets.
Private Equity Opportunity & Risk
Investor appetite is strong as data center demand climbs, driven not only by AI capacity needs but even more so by rising baseline workloads from increased data traffic, supporting confidence in long-term value creation. Hyperscalers are increasingly leaning toward leasing rather than owning, which expands the role for colocation developers to deliver build-to-suit capacity and creates steady pipelines for private capital. Network architecture is also decentralizing toward population centers due to latency and land constraints, often requiring partnerships with local players to navigate siting and regulatory issues.
For sponsors, the investable field extends beyond core facilities to utilities, grid connections, and construction, where joint ventures with energy and engineering, procurement, and construction partners can help unlock scarce capabilities and access to power and grid interconnection. Auxiliary opportunities include cooling, power distribution, backup systems, and energy-management software that improve efficiency and resilience.
Investors should remain mindful of power and grid limitations, shortages of qualified constructors and key equipment, and evolving environmental, data-location, and cybersecurity requirements, all within a long-duration, infrastructure-style return profile. Capital needs are significant, underscoring the importance of scalable financing structures and disciplined capital expenditure planning to support ongoing upgrades and expansion.
In 2025, the $170 billion in asset value of the private equity market will require development or permanent financing. While transaction activity may remain measured in the near term, development finance is emerging as an attractive entry point, particularly given the scale of new projects requiring permanent capital. Success in this market will depend on the ability to structure investments that balance long-term infrastructure characteristics with evolving regulatory and community considerations. Private equity firms must navigate the complexities of infrastructure, regulatory, and community risks to successfully capitalize on this burgeoning market.