Data center demand is exploding as AI and always‑on digital life fuel the sector, which is far outpacing the broader commercial real estate market. Yet a lack of power-adjacent land and increasingly complex approval processes are now slowing projects and threatening to put a ceiling on that growth.
Chief among the current bottlenecks is power availability. U.S. data centers need access faster than utilities are adding more power to the grid. As a result, projects are frequently delayed until local grid capacity is upgraded or expanded.
Another roadblock is an increasingly strict regulatory environment rife with community pushback against data center projects. In the second quarter of 2025 alone, about 20 projects totaling $98 billion in potential investment were delayed or canceled by community opposition, according to Data Center Watch.
“Whether the industry likes it or not, regulation is going to continue to increase everywhere,” says Amanda Williams, special counsel at the law firm Cooley LLP.
Williams was among the data center experts who spoke during a panel hosted by ULI Washington on November 19, 2025, at its headquarters. Jeff Kim, director of site selection and acquisition at Vantage Data Centers, moderated the session, titled “The Data Center Boom: Land, Power, and the Future of the DMV Data Center Market.”
The market, all the panelists agreed, changed dramatically in recent years as hyperscale cloud providers, including Amazon, Google, and Microsoft, hunt for data center space at locations near reliable power. Whereas developers once built data center facilities on spec, the computing demands of AI flipped that script. Hyperscalers now prelease data centers 18–24 months in advance, according to Josh Greenberg, a member of CBRE’s Data Center Solutions group based in Tysons Corner, Virginia.
As a result, significant portions of upcoming capacity are already leased, tightening pricing—amid a 42.9 percent increase in buyer interest in 2025, according to Crexi data—and pushing companies to seek suitable land for development outside established data center corridors. “We’re starting to see things pop up in places that we never would have thought of two years ago, or even six months ago,” Greenberg says. “We would have written it off as ‘there’s no interest there.’ But now it’s, ‘well, if you can get power, there might be interest there.’”
Amanda Williams, land use and development attorney, Cooley; Josh Greenberg, senior vice president, CBRE; Jieer Ren, managing principal, kW Mission Critical Engineering, member of WSP; Frank Scalzo, vice president, Vantage Data Centers; Jeff Kim, director of site selection, Vantage Data Centers, moderator, speaking at the ULI headquarters office in Washington, DC.
Where’s the power?
At the center of every data center project is a pointed question: Where can you find land near scalable, reliable power? For years, northern Virginia—and Loudoun County, in particular—was the answer. Vacancy rates in Loudoun, dubbed “Data Center Alley,” and surrounding areas are now below 1 percent; however, and when it comes to power, there’s a waitlist.
Although it typically takes two to three years to build a data center, “The time to get utility power, in some cases, could be seven to ten years,” Greenberg says. “We’re starting to see the site selection criteria for end users shift from, ‘I know I need to be in northern Virginia,’ to ‘Where can you get me three to 500 megawatts in the next 24 months?’”
In Europe, some of that gap is being filled by renewable energy, as illustrated by the EcoDataCenter 1 project in Sweden.
Prohibitive zoning on the rise
How communities and jurisdictions understand, regulate, and resist data center development changed dramatically in recent years, so getting data center projects approved grew harder, according to Williams.
During early waves of data center development in northern Virginia, zoning applications drew little scrutiny. Data centers were lumped together with industrial or office uses in most zoning codes, allowing for by-right development. In the past three to four years, local governments such as Fairfax and Loudoun counties have tightened zoning rules to impose use-specific conditions, limit proximity to residential or public spaces, control size and noise, and formalize public engagement in the approval process, Williams says. Public hearings and extensive community feedback significantly shaped these more stringent rules.
“There’s a lot more media coverage and the communities are paying much closer attention and organizing themselves in a way that we, historically, have seen folks organize themselves against dense housing,” Williams says.
As a result of the increased pushback, choosing locations that aren’t controversial from a public relations perspective is more important than ever, Williams says. Doing so requires proactive engagement with stakeholders long before any formal process begins.
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Confusion abounds
The panelists addressed common “misconceptions” that drive much of the local backlash against data centers.
Frank Scalzo—vice president of site selection, North America, at Vantage Data Centers and a veteran of northern Virginia’s data center market—says he often hears complaints about electricity costs rising for local residents due to the enormous amount of power data centers consume, but what he has experienced is quite different. Scalzo says that, for the 25 years he’s lived in northern Virginia, his “electricity bill has stayed between 10 and 11 cents a kilowatt-hour—and that hasn’t changed.”
Scalzo explains that utility rates lag behind increases in the consumer price index and that utilities are required to justify rate-case increases to state commissions—a lengthy process. “That process is explicitly designed to make sure that the people who are using utilities are paying their fair share and that other rate payers aren’t getting burdened with that cost,” he says.
The first thing Vantage does when it buys a piece of land for data center development is “write a nine-digit check to the utility for substations, transmission upgrades,” Scalzo says.
In fact, according to Jieer Ren, managing principal at kW Mission Critical, WSP, the data center boom helped upgrade long-neglected power grid infrastructure.
“A lot of data center operators have started building their own power plants and upgrading the U.S. power infrastructure,” Ren says. “That’s a trend that we are seeing, and it’s very beneficial to everyone.”
Communities are also often confused about how much water data centers use. Although water was once used for cooling to offset power use, that approach became less feasible with the emergence of the higher computing power demanded by AI, Scalzo says.
“Most modern data centers no longer use water for cooling,” Scalzo says.”
Even so, April 2025 data from the International Energy Agency shows that data centers worldwide consume around 150 billion gallons [560 billion liters] of water annually, with projections of roughly 1,200 billion liters by 2030 as AI workloads grow. The majority (60 percent) of that water use is indirect, meaning it doesn’t come from water-based cooling. Instead, it derives from the water used in chillers or evaporative cooling towers as part of the overall system—even at “air-chilled” facilities. Whereas leading‑edge, newly designed data centers are moving toward zero‑ or low‑water cooling, their segments are growing and not yet the majority of live capacity.
According to Williams, education is essential to keep confusion around data centers’ very purpose from blocking development.
“One of the fundamental misunderstandings we often see is [around] what a data center is,” Williams says. “At community meetings, the understanding is [that] the data center is really just supporting TikTok dances and Instagram.” In reality, it’s critical infrastructure—banking, hospitals, navigation, and even electric vehicle chargers all rely on data processing in data centers.
Ren stressed that the real estate industry isn’t the driving force behind the data center boom. Instead, “It’s the applications, the AIs that we’re all using, the internet,” he says. “Everything that we do digitally is what’s driving the data center industry.”
Developers look farther afield
Loudoun became a data center nexus because of a rare convergence of fiber infrastructure and available electricity, Scalzo says. “Fast forward 25 years: Power is now hard to find, and fiber is ubiquitous,” facts that are reshaping where different types of facilities can go.
Interconnection data centers—“carrier hotels,” such as ones operated by Equinix—still need to sit in fiber‑rich hubs where networks exchange traffic. Cloud facilities, run by providers such as Amazon Web Services and Microsoft Azure, cluster near existing infrastructure and customers. Yet the emerging “AI factories,” the data centers where AI models are trained “can be anywhere,” Scalzo says, because they do not depend on dense interconnection in the same way. These projects are designed so that their total power capacity can grow up to roughly 1 gigawatt (1,000 megawatts) of electrical load. (A gigawatt‑scale AI campus can use five to ten times the power of a big 100–200 MW hyperscale data center that would already be considered huge today.)
As a result, developers are pushing AI data center projects to rural locations where large, affordable, long‑term power blocks are available—places such as West Texas and New Mexico.
Users are also increasingly exploring on‑site generation, natural gas, and nuclear power to “bring power to sites that don’t have it,” Greenberg says.
Williams called on‑site power a “new frontier” for zoning and regulation. Jurisdictions are still defining “what you can do, what you can’t do, and where you can do it,” she said, urging teams to surface on‑site generation plans early so that local and state regulatory questions do not derail projects late in the process.
Looking back, Scalzo says that if the industry had understood today’s power constraints from the outset, it might have made very different choices. “If we could erase the board and start over, we probably wouldn’t center the universe around Loudoun County,” he says. “We’d probably put it in West Texas, where the energy is, because our priorities have changed.”
