With All Eyes on AI, Data Centers Are Commercial Real Estate’s Jewel for 2026
•January 16, 2026
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Why It Matters
The surge in AI‑driven demand and constrained power supply creates a pricing premium and high‑yield investment opportunity, reshaping commercial real‑estate priorities for the next decade.
Key Takeaways
- •Record leasing and absorption hit historic highs 2024‑25
- •Power availability, not demand, limits new data center supply
- •Neo‑clouds driving AI GPU demand, tightening capacity
- •Latency shift pushes growth to secondary markets near users
- •Data center yields exceed 10% with development margins >50%
Pulse Analysis
The data‑center boom is being fueled by hyperscalers’ aggressive capital plans and a wave of neo‑cloud providers that need massive GPU clusters for AI workloads. This dual demand has driven leasing activity to unprecedented levels, with operators reporting backlogs that outstrip supply in traditional hubs. Investors are responding by allocating capital to data‑center assets that promise stable cash flows and high returns, positioning the sector as a core component of diversified real‑estate portfolios.
Power constraints have emerged as the sector’s most critical limiting factor. Regions that can quickly secure gigawatt‑scale electricity, such as Atlanta, Dallas‑Fort Worth, Milan, Frankfurt and Paris, are attracting the bulk of new development. Conversely, legacy markets like London, Northern Virginia and Amsterdam face grid and permitting bottlenecks, prompting developers to look toward secondary and tertiary locations—including West Texas and the U.S. Midwest—where power is abundant and land costs are lower. This geographic shift is reshaping the data‑center landscape and creating new pricing dynamics.
Looking ahead, the evolution of AI from compute‑heavy training to latency‑sensitive inference will re‑centralize capacity closer to end‑users. While dense urban cores remain impractical due to land and power scarcity, secondary markets near major population centers will gain prominence, supported by expanding fiber networks. This latency‑driven migration will reinforce emerging hubs, sustain high yields, and ensure the sector’s resilience even if AI monetization slows, making data centers a strategic long‑term investment in the commercial‑real‑estate arena.
With All Eyes on AI, Data Centers Are Commercial Real Estate’s Jewel for 2026
While much of the commercial real estate sector tries to find its post‑pandemic footing, data centers are sprinting into blue‑sky territory. Record leasing activity, sustained hyperscaler demand, and accelerating AI investment have pushed the sector into an unprecedented phase of growth. This created what some described as a “couldn’t ask for more 2024,” followed by an equally stellar 2025.
Heading into 2026, data center fundamentals remain strong. Hyperscalers have signaled higher infrastructure budgets; operators report record backlogs; conversations around future deployments are already underway. From an investment perspective, data centers are maturing from a cyclical niche to a core element.
Record Demand, With More Still Ahead
Leasing and absorption across major US and European data center markets reached historic highs over the past year. Hyperscale tenants accounted for the majority of new capacity commitments, driven by expanding cloud services and the early stages of large‑scale AI deployment.
Related: Power, Not Space: The Colocation Battleground in 2026
While hyperscalers have not yet released formal 2026 capital expenditure guidance, commentary from recent earnings calls has been clear: spending is expected to increase significantly and aggressively. That confidence is already filtering through the market. Data center landlords report that discussions around first‑quarter 2026 deployments are already underway, a sign that demand is set to expand.
At the same time, new participants – often referred to as “neo‑clouds” – are emerging as an additional demand source. These firms secure access to high‑performance GPUs and lease large blocks of capacity to support AI workloads, which further tightens availability across key markets.
Power Access: The Primary Constraint
The main limit in today’s data center market is not tenant appetite but access to power. The markets forecast the greatest supply growth over the next several years, including Atlanta, Dallas–Fort Worth, Milan, Frankfurt, and Paris. These all share a common advantage: they can quickly bring large amounts of power online.
In contrast, some of the world’s most connected markets, such as London, Northern Virginia, Amsterdam, and Dublin, face challenges related to grid capacity and permitting timelines. Demand in these locations has not diminished, but the pace at which new capacity can be delivered has slowed.
This dynamic has accelerated growth in secondary and tertiary locations. In the U.S., West Texas, parts of the Midwest, and other rural areas are seeing gigawatt‑scale pre‑leasing activity – a level of demand difficult to imagine just a few years ago.
Related: Neoclouds vs. Hyperscalers: Will AI’s Specialized Clouds Prevail?
Latency Will Matter Again
That said, today’s geography of growth is not permanent. As AI applications evolve from training‑intensive workloads to real‑time inference – used directly by consumers and enterprises – latency will once again become critical. Data will need to live closer to its users.
This shift will not mean building data centers in dense urban cores, where land and power constraints remain prohibitive. Instead, it will favor secondary markets near major population centers that can balance connectivity, latency, and infrastructure availability. Over time, fiber networks will follow computing resources, reinforcing new hubs and gradually altering the relative importance of established markets.
Markets that aggressively restrict data center development may benefit in the near term from scarcity‑driven pricing. But in the long run, they risk losing relevance as infrastructure investment migrates elsewhere. Encouragingly, some regions – Silicon Valley included – are recognizing the importance of planned, collaborative growth.
Why Investors See a Safe Haven
From an investment standpoint, data centers stand out for their return profile and strategic relevance. Stabilized net operating income yields exceeding 10 % and development profit margins north of 50 % reflect not only strong fundamentals, but also the sector’s higher complexity and execution risk.
Related: How Data Centers Redefined Energy and Power in 2025
A significant slowdown in AI monetization would have downstream implications for infrastructure demand. However, history suggests data centers will remain uniquely resilient. During recent periods of economic disruption, they outperformed many other real estate sectors as organizations leveraged digital infrastructure to control costs, automate processes, and maintain operations.
Looking ahead, the trajectory of AI adoption will remain a critical variable. Faster‑than‑expected monetization would likely drive even greater demand for capacity, while ongoing power constraints would further strengthen pricing for existing assets.
As the data center sector moves into its next phase, success will hinge less on identifying demand and more on understanding how technology trends, infrastructure capacity, and policy decisions intersect. Investors and operators who grasp those dynamics – and position themselves accordingly – will be best equipped to navigate what could be one of the most consequential periods in the sector’s history.
In the data center milieu, the combination of record demand, structural constraints, and long‑term digital dependence is impossible to ignore. In an often unsettled commercial real estate landscape, this represents a kind of certitude no large language model could fault.
About the Author
David Guarino – Managing Director and Head of Global Data Center and Tower Research at Green Street.
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