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As hyperscalers like it Nvidia, Amazon, Google And Meta announce more and more data center projects, the cries of bubble multiply. Some say that the sector is already in full construction for a market that is still in its infancy and which has many unknowns. There are also concerns that financing some of these projects could be risky.
Andy Power, CEO of Digital Realty, the world’s second-largest data center REIT, says just the opposite.
Power has been with the company for 25 years and said he isn’t concerned about too much construction in the area.
“Based on real demand from real customers with real long-term 15-year contracts, we are not in a state of oversupply today,” he told Property Play.
The global data center industry is poised for unprecedented continued expansion, with capacity expected to nearly double from 103 gigawatts to 200 gigawatts by 2030, according to a new outlook from JLL. Of course, this is due to artificial intelligence, which JLL says is rapidly reshaping the data center landscape. The real estate research firm predicts that AI workloads will account for half of total data center capacity by 2030. It also says that “real estate metrics do not indicate a bubble.”
In fact, JLL predicts that industry growth will require up to $3 trillion in total investment over the next five years, including $1.2 trillion in real estate asset value creation and approximately $870 billion in new debt financing. The report calls it an infrastructure supercycle.
“We are seeing the most significant transformation of data center infrastructure since the initial migration to the cloud,” said Matt Landek, president of Global Data Center and Critical Environments at JLL. “The scale of demand is extraordinary. Hyperscalers are allocating $1 trillion to data center spending between 2024 and 2026 alone, while supply constraints and four-year grid connection delays create a perfect storm that fundamentally reshapes our approach to development, energy sourcing and market strategy.
JLL predicts that AI workloads could account for half of total data center capacity by 2030, up from around 25% in 2025.
Digital Realty’s Power outlook is more fundamental. He says the industry is simply building on technology trends like cloud computing and digital transformation, which have a long-term horizon.
“Will there be ups and downs along the way? I’m sure there will be,” Power said. “But these are trillion-dollar companies that have real cash flow and are investing in this innovation. And we in digital and data centers, especially the way that we’re doing it, are really trying to do it in a way that is sustainable for the long term, that will insulate us and help meet the needs of everyone in this region.”
Power also said the real estate side of the AI arms race is less risky than the hyperscalers themselves.
“In our strategy, the bricks, sticks and physical infrastructure that we invest in, I see tremendous protection against any kind of shock. We’re basically in a place where demand is way outpacing supply, so the speculative data center is getting built, you can’t build it fast enough for customers,” Power said, adding that vacancies at Digital Realty are the tightest they’ve ever been.
As with any real estate, Power also emphasized location. Digital Realty is investing in areas where workloads require data, such as Northern Virginia; Chicago; Dallas; and even Singapore, Tokyo, Frankfurt, Germany and London – “close to eyeballs, to consumption, to devices,” he said.
When it comes to financing, however, Barry Sternlicht, president of Starwood Capital Group, and others have raised concerns.
“What we are monitoring now is the solvency of the tenant, and in particular Oraclebecause Oracle does all these transactions with Chat[GPT]” Sternlicht said on the “Property Play” podcast in November. “And Chat is a startup that doesn’t make money and needs hundreds of billions of dollars to reach the scale that it wants to achieve.”
Power noted that all the companies involved, including Oracle, have huge businesses outside of AI and (with the exception of Oracle) they all want to own their real estate. Right now they have about half of that for data centers.
“They don’t believe they’re going to give up these positions in the markets,” he said.