The technology sector has seen significant advances in technologies such as the Internet of Things (IoT) and artificial intelligence (AI) over the last few years, as pandemic-era efforts to advance automation capabilities come to fruition. As these solutions grow in scope and capabilities, they rely on data centers to manage, process, and store information.
The United States has become the undisputed leader in data centers. The nation boasts more than 5,400 data centers as of March 2025. Germany took second place, trailing way behind with 529 data centers. Yet, even with so many data centers in operation, demand continues to rise.
Demand for Data Center Space Heats Up
Most new enterprise and consumer technologies exist in the cloud as the technology sector continues its shift toward subscription-based models over one-time license purchases. Meanwhile, many advanced manufacturing operations have given up their on-premises server farms in favor of off-site data storage and processing. As new technologies emerge and facilities come online, the demand for data centers is expected to continue growing.
“The rapid interest in data centers is reshaping the industrial real estate landscape,” says Frank Crivello, Founder and Chairman of Milwaukee-based commercial real estate firm Phoenix Investors. “We’re seeing traditional industrial markets trying to adapt to this need, as data centers compete for some of the same sites that advanced manufacturers and logistics operations want.”
AI and machine learning will double the demand for data centers by 2030. As demand for data centers continues to grow, the property type has drawn interest from investors frustrated with the volatility in traditional CRE markets like office space. As these investors seek to bolster their portfolios with more stable assets, prices will continue to climb upward — especially in primary markets.
The Appeal of Secondary Markets for Data Centers
The vacancy rate for data centers hit a record low 2.6% at the end of 2024, according to data from JLL. But if the rush on logistics properties during the pandemic taught us anything, it’s that tenants have other options beyond primary markets.
Just as warehouse developers and tenants began to seek alternative options in secondary markets a few years back, the same thing is happening now with data centers. The real challenge, however, is finding secondary markets that can handle the stringent siting requirements for this type of facility.
For example, large areas of the U.S. power grid simply can’t support the electricity needs of data centers and other high-tech industrial facilities. Similar issues exist with water access because data centers use millions of gallons of water for their cooling systems each year. For obvious reasons, access to high-speed broadband internet is also a must-have for any data center.
Finding a good data center location like this one in a secondary market is challenging but not impossible. Opportunities are available for those who know where to look.
Where Data Goes, Real Estate Grows
The world we live in is becoming increasingly digital. Since the technologies that drive digital transformation for businesses and consumers need data centers, the market has nowhere to go but up.
Phoenix Investors has a long and successful history of finding industrial sites with great potential for a second life. Our nationwide portfolio features numerous sites with access to sufficient electricity, water, and fiber optic networks for data centers. If you’re searching for an appropriate site for a data center, please contact us to see how we can help.
About Phoenix Investors
Founded by Frank P. Crivello in 1994, Phoenix Investors and its affiliates (collectively “Phoenix”) are a leader in the acquisition, development, renovation, and repositioning of industrial facilities throughout the United States. Utilizing a disciplined investment approach and successful partnerships with institutional capital sources, corporations and public stakeholders, Phoenix has developed a proven track record of generating superior risk adjusted returns, while providing cost-efficient lease rates for its growing portfolio of national tenants. Its efforts inspire and drive the transformation and reinvigoration of the economic engines in the communities it serves. Phoenix continues to be defined by thoughtful relationships, sophisticated investment tools, cost-efficient solutions, and a reputation for success.
