Data centers, tied to lagging power grid, see slowing growth

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By CHUCK SLOTHOWER

BridgeTower Media Newswires

Data center construction is slowing nationwide as U.S. electrical infrastructure struggles to keep up with demand, according to a CBRE report.

Nationally, data centers totaling 5,242.5 megawatts were under construction in the first half of the year, down 17.4 percent from 6,350.1 megawatts in 2024, according to the brokerage.

Data center investments fell by more than half in the first six months of 2025 to less than $1 billion, CBRE reported.

“This slowdown was largely the result of delayed decision-making by investors due to economic uncertainty, geopolitical conflicts and power supply challenges,” the brokerage stated.

Companies including Microsoft and Amazon Web Services have paused or slowed their data center growth this year, while other large operators continue to expand.

Despite the constraints, demand remains strong, said Kristin Hammond, a CBRE senior vice president and broker based in Portland

“The infrastructure has now been outpaced by the construction of facilities,” she said. “There’s no use to having the facility if you don’t have the power poles to service it.”

Hillsboro, along with big cloud-computing players in the Prineville area and The Dalles, remains the epicenter of the Oregon data center boom, Hammond said.

Hillsboro’s data centers had an almost nonexistent 0.2 percent vacancy rate in the first half of the year, the lowest in the nation for a major market. Rental rates averaged $150 to $155 per kilowatt per month, according to CBRE.

Net absorption in the first half of the year totaled 48.4 megawatts.

Oregon remains a popular destination for data center operators, in part due to geography, relatively cheap energy and a skilled high-tech construction workforce. Hillsboro had 475.4 megawatts of data center inventory, making it the seventh-largest market in the country, according to CBRE data. Northern Virginia remains by far the nation’s largest data center market.

Increasingly, Oregon subcontractors are being sought for data center projects in other states, said Gabe Fox, chief estimator for Mortenson in Portland.

“We have a really strong labor force that’s highly technical, which is not always the same in other markets,” he said. “We have some of the best sheet metal companies and electrical companies here in the Northwest. These companies are being sought after to bring their expertise. … They’re definitely staying busy.”

In addition to contractors’ abilities to build high-tech projects, Portland General Electric‘s experience powering semiconductor facilities has given it a leg up in providing electricity to data centers, Hammond said.

“PGE has been very savvy about it,” she said.

PGE is seeking additional energy sources to alleviate the power crunch. The company in 2023 issued a request for proposals for new power sources. Then in September 2024, PGE recommended a list of chosen projects to the Oregon Public Utility Commission. PGE is now working with the bidders to update their pricing following the passage of the federal budget bill.

PGE plans to finalize contracts this year, with projects expected to come into service by the end of 2027, the utility disclosed in July.

PGE CEO and President Maria Pope told investors during a July 25 call that the company is “seeing sustained growth from data center and high-tech customers – over 16 percent compared to the same quarter last year.”

PGE locks in long-term contracts of 10 years or more with data center customers, which allows the utility to better securitize and finance its operations, Pope said.

Nationally, CBRE found data center vacancy dropped to 1.6 percent, a record low.