Data Center Construction Spending Surges 34% YoY, Office Building Spending Drops 9%

Construction spending on data centers in the US reached a seasonally adjusted annual rate of $50 billion in March, up 34% year-over-year and 437% since early 2021, according to Census Bureau data. This boom, driven by AI investment mania, has for the first time exceeded spending on office construction, which fell 9% YoY to $46 billion, the lowest since 2015. The data center construction surge has caused supply constraints in labor and electrical equipment. Meanwhile, spending on power plants and distribution rose 5.5% YoY to $125 billion, but utilities are cautious about potential stranded assets if the AI bubble bursts. Factory construction spending dropped to $189 billion annual rate in March, down from its 2024 peak, but still up 154% since early 2021. Semiconductor plant construction fell sharply to $70 billion, though a second wave is emerging, including SpaceX's Terafab in Grimes County, Texas, with an estimated $55 billion first-phase investment. Construction cost inflation for nonresidential buildings accelerated to 3.3% YoY in March, after near-zero inflation in 2023-2024. PitchBook projects nearly $3 trillion in AI-related capital expenditure through 2028.