{"id":1004744278,"date":"2025-01-24T06:29:28","date_gmt":"2025-01-24T14:29:28","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004744278"},"modified":"2025-11-11T07:03:55","modified_gmt":"2025-11-11T15:03:55","slug":"stargate-promises-big-data-center-development-but-obstacles-remain","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/stargate-promises-big-data-center-development-but-obstacles-remain\/","title":{"rendered":"The Stargate Project Promises a Data Center Boom. Can It Deliver?"},"content":{"rendered":"
\n
\"John
John McWilliams, Cushman & Wakefield’s head of data center insights, noted that power constraints may be one of the biggest challenges to the project’s viability. Photo courtesy of Cushman & Wakefield<\/em><\/figcaption><\/figure><\/div>\n\n\n

The AI-spurring Stargate Project was front and center at the White House the day after the inauguration of President Donald Trump, but its real estate footprint remains undetermined beyond a group of data centers under construction in Abilene, Texas, about 150 miles west of Fort Worth.<\/p>\n\n\n\n

Such a large expansion would face the same challenges<\/a> as the industry as whole already does, including constraints on energy, construction resources and good sites for data centers, experts tell Commercial Property Executive<\/em>.<\/p>\n\n\n\n

$100 billion flood of investment<\/h2>\n\n\n\n

“We have a significant power issue that has to be solved before we need to consider construction resources,\u201d Pat Lynch, CBRE’s global head of data center solutions, told CPE<\/em>, referring to the industry’s ever-growing need for power. \u201cIt\u2019s also challenging to know if there will be enough construction resources, because the timeline for allocating the capital to the project is still unknown.\u201d<\/p>\n\n\n\n

\u201cBefore considering construction resource availability to fulfill the announced $100 billion investment by the Stargate joint venture, we need to consider what power availability looks like,\u201d agreed John McWilliams, a research manager at Cushman & Wakefield and the firm’s head of data center insights.<\/p>\n\n\n\n

\u201cThis is the first thing that developers are going to look at when evaluating a new project,\u201d McWilliams said. \u201cCan the grid support an x<\/em>-megawatt project? This is also going to show significant variance from market to market.\u201d<\/p>\n\n\n\n

The announcement promised that Stargate would deploy $100 billion \u201cimmediately\u201d as the beginning of an investment of $500 billion over the next four years \u201cbuilding new AI infrastructure for OpenAI in the U.S.,\u201d which presumably means a large expansion in data centers, though no specifics were given. It is possible that some large percentage of the total would go toward developing power infrastructure for the new data centers, which is acknowledged to be a critical need to make Stargate work.<\/p>\n\n\n\n

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READ ALSO:<\/strong> Why Big Data Centers Are Going Nuclear<\/a><\/p>\n\n\n\n

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Nor is it clear whether the announced total funding includes previous funding for data centers announced by the lead companies, or whether they have that kind of capital to begin with. Tech mogul Elon Musk publicly asserted that they did not, which was in turn denied by SoftBank, which, together with OpenAI, Oracle and MGX, collectively formed Stargate. The partners made the project announcement on the first full day of the second Trump administration, with the president asserting his support through unspecified emergency declarations.<\/p>\n\n\n\n

Assuming the capital can be deployed, and even if only a large percentage of that $100 billion goes into developing data centers per se<\/em>, that could potentially represent an enormous bump for a sector that is already booming, and exacerbate the industry’s growth woes.<\/p>\n\n\n\n

Through the first six months of 2024, a total of 78 data center projects began construction nationwide, according to Dodge Construction Network data<\/a>, totaling more than $9 billion in investment. This is the largest value and number of projects that data centers have ever seen in a first half going back to 2008.<\/p>\n\n\n\n

Data center growth capacity strained<\/h2>\n\n\n\n

\u201cThe Stargate initiative is a game-changer for data center development, but it\u2019s going to test the industry\u2019s capacity to deliver,\u201d said Howard Berry, Avison Young principal of national data center solutions.<\/p>\n\n\n\n

\u201cWe\u2019re already seeing pressure on supply chains for critical materials like semiconductors and electrical components, and addressing those bottlenecks will require close coordination with suppliers and a proactive approach to securing resources,\u201d he noted.<\/p>\n\n\n\n

According to JLL\u2019s 2025 global data center outlook, an estimated 9.8 GW is projected to break ground globally in 2025 across hyperscale and colocation segments, with 4.4 GW of that new construction in North America. Separately, 3.3 GW is likely to reach completion in North America this year.<\/p>\n\n\n\n

\u201cMost of that space is already pre-leased and won\u2019t be enough to satisfy current demand,\u201d Kristen Vosmaer, Managing Director, JLL Data Center Work Dynamics, told CPE<\/em>. <\/p>\n\n\n\n

Thus there are enormous market incentives in play to spur growth among data centers, but Vosmaer said the challenges of growth can be met.<\/p>\n\n\n\n

\u201cWhile the supply chain and labor market remain somewhat constrained in some markets, these challenges are overcome by proper planning and collaboration,\u201d Vosmaer noted.<\/p>\n\n\n\n

Labor remains another big piece of the equation, Berry added. The shortage of skilled workers such as electricians, HVAC technicians and IT professionals means prioritizing training programs and actively bringing new talent into the field.<\/p>\n\n\n\n

Cost is also a factor. Data center building costs have increased by more than 35 percent since the beginning of 2019, McWilliams told CPE<\/em>, citing Cushman & Wakefield Research data.<\/p>\n\n\n\n

There are also currently significant lead times required for data center components, some as high as 30 to 38 weeks to order generators and nearly 12 months for switchgear, McWilliams said. Labor availability and costs, show significant variance across markets with labor availability higher in larger markets.<\/p>\n\n\n\n

\u201cWe are hearing about extended lead times for electrical equipment \u2013 switchgear, transformers, and so on, for development that is a challenge delaying construction timelines,\u201d agrees Gordon Dolven, director of Americas data center research at CBRE.<\/p>\n\n\n\n

\u201cOn the labor front, construction workers, mechanics, electricians, and plumbing experts are all required for a modern facility,” Dolven said. “Site selection factors into proximity to major airports for this specific reason.\u201d<\/p>\n\n\n\n

Tricky site selection challenges ahead<\/h2>\n\n\n\n

The data centers under construction in Abilene, now under the Stargate Project aegis, include 10 buildings totaling 5 million square feet, with a planned expansion of another 10 buildings of similar size, Oracle Chief Technology Officer Larry Ellison said at the announcement.<\/p>\n\n\n\n

Stargate also said that talks are ongoing with local officials around the country to find sites for more data centers, but didn’t identify any particular locations. Virginia, Ohio and Texas are the top states for data center construction, with the accessibility of power infrastructure, a lower cost or wider availability of land, and the competitive tax incentives offered by the states figuring into their popularity, Dodge explains.<\/p>\n\n\n\n

Adding further data centers to the largest markets, or even in other parts of the country, stands to be sometimes problematic, as the race will be on the sites necessary for expansion and competition for those sites will be fierce. Localities in various parts of the country are also pushing back on data center development as it stresses electric grids.<\/p>\n\n\n\n

For example, a number of legislators from both parties in the Virginia General Assembly\u2014whose state is home to more data centers than any other\u2014are working on measures<\/a> to tighten state oversight of data centers, perhaps even pause development, though for now no proposal is likely to pass.<\/p>\n\n\n\n

To deal with site selection issues, one strategy that the data center industry is going to pursue is turning to emerging markets with ample power capacity, potentially opening new sources of labor as well, Vosmaer said.<\/p>\n\n\n\n

Nevertheless, site selection will be increasingly tough, perhaps even more so as a flood of Stargate properties comes to market to compete for sites as well.<\/p>\n\n\n\n

\u201cFinding and preparing development-ready sites is an equally pressing challenge,\u201d Berry noted. \u201cEven if you locate a site with potential for power, you\u2019re looking at a three- to four-year wait just to secure a breaker or transformer to turn that power on. That\u2019s a serious bottleneck.\u201d<\/p>\n\n\n\n

Part of the solution is partnering with groups that already have a head start in addressing these issues, but the industry also needs to rethink its reliance on the traditional power grid.<\/p>\n\n\n\n

\u201cThe future of data centers lies in self-generating power through technologies like SMRs (small modular reactors) or gas turbines,\u201d Berry said. \u201cNot only does this provide reliability, but it also creates the opportunity for data centers to feed power back to the grid using low-emission resources, making them a net positive for the broader energy ecosystem.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Power is the main issue, but construction resources and site allocations present additional challenges.<\/p>\n","protected":false},"author":1023,"featured_media":1004744279,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21755,21782,21808,23891,21742,51037],"tags":[33022,32789,34908],"class_list":["post-1004744278","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-data-centers","category-development","category-featured","category-national","category-latest","category-trends","tag-avison-young","tag-cbre","tag-cushman-wakefeld"],"acf":[],"yoast_head":"\nThe Stargate Project Promises a Data Center Boom. 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