T
he rapid growth of artificial intelligence (AI) technology is causing disruptions in various sectors, including commercial real estate. The increasing demand for data centers to support AI operations has sparked concerns about resource consumption and environmental impact. These sprawling facilities require massive amounts of power, silicon, and water to keep their complex computer systems cool.

    As a result, the construction of large data centers at an accelerated pace is putting pressure on commercial real estate markets. Blackstone's acquisition of Quality Technology Services (QTS) for $10 billion in 2021 highlights this trend. The company has invested over $100 billion in data centers and related infrastructure, with other prominent firms like KKR, BlackRock, and Blue Owl Capital following suit.

    However, analysts warn that the rapid expansion of data centers may lead to an oversupply of properties, particularly as some tech companies have pulled back from leases. Despite this, OpenAI's recent investment in new facilities overseas and another major purchase in Arizona suggest that demand remains strong.

    According to JLL analysis, the rate of data-center electrical capacity is increasing by 15% per year, but still falls short of meeting demand. To accommodate growing needs, centers are shifting towards liquid cooling, making construction more complex and electricity demands skyrocketing.

    Some companies, like Alibaba Group Holding Ltd., have expressed concerns about the potential for a bubble in the AI data center market. Chairman Joe Tsai warned that demand could be outpaced by supply, at least in the short term.

    The regulatory landscape may also impact the pace of construction and uptake. A provision in the "Big Beautiful Bill" restricting state-level AI regulation for 10 years has raised concerns among lawmakers and state officials. The fate of this provision remains uncertain as it undergoes Senate reconciliation.