Data center-related real estate investment has certainly been a trend in recent years, and Texas is no exception, with a current state-wide data center count of 336 (for context, in 2015 Texas had 91 data centers). During a period when real estate investing in the multi-family and office sectors has been treacherous, growth in data centers has been a bright spot, in large part due to AI-related drivers.
While some may argue that the market will become saturated with data centers at some point, others would point to the competitive advantages from building and operating in Texas, including the relative abundance and variety of power sources (electric, natural gas, wind, nuclear), large swaths of land that can be purchased and developed cost-effectively, and the ability to develop in Texas with relatively less bureaucratic red tape than many other locales. And yet others have raised concerns about Texas' recent surge in data center development and the toll that it takes on the state's electrical grid, which according to one article accounts for about 8.8% of the state's total annual electricity demand.
We will continue to monitor these trends, including (1) the secondary and tertiary effects that they are likely to continue to have on the Texas economy and real estate landscape, and (2) institutional investor demand for data center/AI-related real estate.
Texas has seen rapid growth in data centers, especially the facilities needed to run the energy-intensive computations that power AI.
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