The artificial intelligence industry's ambitious Stargate Project is already in expansion mode in West Texas as work begins on a second phase of the 875-acre site — a tract bigger than New York City's Central Park — to bring a total of eight buildings with 1.2 gigawatts of power.
AI infrastructure provider Crusoe said the next phase, in addition to the first stage still under construction, is bringing the high-profile data center project to a total of about 4 million square feet at the sprawling campus in Abilene, Texas, a city about 150 miles west of Fort Worth.
The Stargate Project, backed by AI giant OpenAI, Oracle and Softbank, announced plans to spend $500 billion on new data centers and other infrastructure as the U.S. looks to lead the world in the development of the technology.
The project selected Texas for its first development in part because the state can provide enough energy to power the center complex. It's a sign that data center operators are willing to look outside traditional data center markets for locations that can serve the fast-growing industry.
North America is on the "verge of the biggest data center development binge I've ever seen in this industry," Curt Holcomb, a senior vice president and co-leader of the mission critical solutions team for JLL, told CoStar News.
Not counting the Stargate project, Texas has already surpassed the nation's dominant data center market in Northern Virginia for new construction, with 1,191 megawatts of colocation power underway in the major Texas cities compared to 1,071 megawatts of power in the pipeline in Northern Virginia. according to JLL.
Texas taps data center demand
"Dallas-Fort Worth is leading the country for what's under construction in the next 36 months," Holcomb added. "If we look at what's being built in other markets, there's significantly more underway in Texas because if you look at Northern Virginia, their power capacity is all tied up and it's taking too long for a utility to bring power to market. Texas is in a different position; we have more fuel than anywhere else in the country."
The vacancy rate for data center space in North America hit an all-time low at the end of 2024 despite several years of record construction. In all, JLL's research has clocked about 6.6 gigawatts of power under construction in North America, of which about 72% was preleased to tenants. Any second-generation space that pops up is typically re-leased within weeks and tenants seeking any sizable amount of space typically must wait two years for it to be developed, constraining growth.
That long lead time, tied to power availability, has tenants and data center developers looking outside major U.S. data center markets for options.
Raul Saavedra, vice chair and head of data center advisory for the Americas for Colliers International, said that's put rural places once considered far afield by data center users — such as the Dakotas and small West Texas towns — on the map. It's a key reason why Abilene is playing a part in Stargate's plans.
"Power is the big stumbling block, there's not a lot of huge tranches of power just sitting out there," said Saavedra, who oversees Colliers' data center advisory from San Francisco. "There will be some power unlocked, but not at the scale needed in the next 24 months. That's means we'll do data centers on a smaller scale to get us to where we want to go, and users will push to these emerging markets."
JLL's executive managing director and co-lead of U.S. data center markets, Andy Cvengros, echoed Saavedra's concerns on power availability becoming the defining constraint on growth.
"It’s the new ‘gold rush,’ as developers, occupiers and investors are competing for available power, land and equipment," Cvengros said.
In Texas, that gold rush is pushing tenant interest south from the Dallas-Fort Worth region, down Interstate 35 into Central Texas, and westward into West Texas, executives said. JLL data shows the Austin-San Antonio data center market has more than doubled in size since 2020.
Other emerging data center markets throughout the United States are popping up, from northwest Indiana to Louisiana to Minneapolis to Columbus, Ohio, as places with access to power.
Former Google CEO Eric Schmidt suggested in a co-authored, published report that building data centers in remote locations could help conceal the locations of data centers that house AI in case of an attack by a foreign nation. That would take a page out of the nuclear era, the report said, in which intentionally placing "large AI data centers in remote areas" would ensure that if any "aggressive maiming action ever occurs, that action would not put cities into the crossfire."
Some developers have other worries. Will it be more difficult to sell a property that is located in a smaller or more remote market?
"This is a conversation I'm having with folks in real time, they are concerned about what this could mean for their exit if they aren't in a major market," Saavedra added.