How The Rising Electricity Demand of AI Data Centers Will Impact The Commercial Real Estate Sector

With AI in the early stages of a technology super-cycle, one theme is becoming increasingly clear: the buildout of hyperscaler data centers to support AI hinges on access to an abundant and stable electricity supply.

The growth in electricity demand is already reshaping the U.S. electricity market, especially across the commercial sector, in which data centers are categorized. And the ripple effects are just beginning, since few predicted just a few years back that AI would get this big, this quickly, and require as much electricity as it does.

Changes in Electricity Usage Between 2015 and 2025

Over the past decade, total U.S. electricity consumption has grown modestly, largely due to improved building efficiency gains and smarter building technologies. However, look a level deeper, and an important trend emerges., with the commercial and transportation sectors have gained share over recent years.

As of 2025, the estimated share of utility sold electricity is split between:

• Commercial: 35%

• Residential: 35%

• Industrial: 23%

• Transportation: 3%

The four sectors do not add up to 100% because the remainder accounts for Transmission & Distribution (T&D) losses that can't be monetized

AI Is Reshaping Commercial Energy Usage and Prices

Data centers fall under the commercial classification, and the rise of AI is rapidly reshaping which commercial activities consume the most electricity.

According to projections from the U.S. Energy Information Administration (EIA), computing is on track to become the largest single use of electricity in the commercial sector by 2050; surpassing refrigeration, lighting and even HVAC systems.

Top 5 Commercial Uses of Electricity

2024

1. Ventilation

2. Space Cooling

3. Lighting

4. Refrigeration

5. Computing

   
   

2035 (projected)

1. Ventilation

2. Space Cooling

3. Computing

4. Lighting

5. Refrigeration

   
   

While it's still very early in the AI revolution, it's clear that data centers are becoming the most energy-intensive assets in the modern economy.

As states race to attract AI infrastructure, commercial properties will increasingly face competition for limited electricity supply and grid capacity.

Where The Commercial Electricity Markets Are Heading

Even under conservative forecasts, such as the U.S. Energy Information Administration, which tracks utility sold electricity, AI-related electricity consumption is expected to grow significantly. It is projected to rise from approximately 100 billion kWh in 2025, to 125 billion kWh by 2030, and to reach nearly 200 billion kWh annually in 2035.

Comparing the EIA 2030 forecast to major consultancies' forecasts:

• PwC expects U.S. data center's annual electricity to reach approximately 350 billion kWh

• Bain expects U.S. data center's annual electricity to reach approximately 380 billion kWh

• McKinsey estimates that the electricity consumption of the data centers could reach 500 billion kWh in 2030

Importantly, many of the largest data centers are expected to have access to on-site generation, which will partially offset their reliance on the grid, but not without having some impact across the commercial market for electricity.

The Pluses and Minuses of Data Center's Electricity Investments For The Commercial Sector

While the growth of data centers poses challenges and is expected to contribute to electricity inflation, it also presents opportunities.

Hyperscalers are investing in energy innovation at a scale that could benefit the entire commercial sector, including utility-scale storage, next gen cooling technologies and small modular nuclear reactors.

They are also financing upgrades to aging utility infrastructure and accelerating the deployment of renewable energy technologies beyond what would otherwise be possible.

However, the sheer size of the data center's electricity usage, which is projected to reach ~ 22% of all the electricity consumed by the U.S. commercial sector by the end of the decade, is expected to place sustained upward pressure on prices. This is especially true given that the data centers are central to the AI economy and are highly prioritized by hyperscalers, who rank among the most deep-pocketed companies in the world.

Staying Ahead Of Electricity Inflation

As electricity becomes a more substantial expense, it should no longer be considered as just another operational cost. Energy needs to be managed strategically.

Now more than ever, it's important to stay ahead of where prices are heading, so the right levers can be deployed to generate annual energy savings. Savings that directly translate into higher NOI and stronger valuations.

Email stuart@westchestercleanenergy to set-up a free initial consulation.