Despite Headwinds, Data Center Construction Hits Record

Data centers may be a sore point in local policy conversations, but for developers in the sector, the good times continue to roll.

In April, construction in the sector eclipsed $50 billion for the first time, according to the U.S. Census Bureau. The record level still represents just 2.3 percent of all construction spending in the country, according to Bloomberg.

April also marked the first time private data center construction spending outpaced public spending on transportation, including airports and mass transit projects. The report includes annualized rates not adjusted for inflation.

“Apart from data centers, we expect non-residential spending to remain quite sluggish…amid heightened uncertainty due to the war and rising input costs,” said Nancy Vanden Houten, the lead U.S. economist at Oxford Economics, in a note.

Data centers increasingly look like the fuel for commercial real estate’s broader construction activity. The sector appeared to be the only major commercial‑construction segment in expansion mode at the start of the year, as FMI projected a 23 percent jump in spending year-over-year in 2026.

Amazon, Google and Oracle continued pouring billions into AI‑driven facilities despite higher interest rates, material costs and labor shortages dragging down office, hotel, apartment and warehouse building.

But problems are popping up for the sector.

The expansion of AI-fueled data centers is meeting resistance from investors and local communities over high power and water consumption, forcing tech giants like Amazon, Microsoft and Google to scrap multibillion-dollar projects.

Investors are demanding greater disclosure on site-level water usage and energy consumption to mitigate growing financial and environmental risks.

Local opposition, meanwhile, is increasing due to concerns over strained water supplies, rising power costs and land use, leading to project stalls and legislative actions such as proposed construction moratoriums.

President Donald Trump targeted high building costs this month with a proclamation to temporarily reduce tariffs on imported steel, aluminum and copper equipment.

— Holden Walter-Warner