There is less than 1,500 MW available for pre-leasing across all of North America’s primary markets, and more than 80% of everything under construction is already spoken for. CBRE published those figures on August 27 for the first half of 2026, alongside a 1.4% vacancy rate that hasn’t moved since the end of 2025.
In a market that tight, the date you need power is the constraint and everything else negotiates around it, which is why the decision starts with the calendar rather than with the capital plan.
Under 18 months, colocation is the only path that reliably delivers. No retrofit and no ground-up build gets new capacity energized inside 18 months in 2026, because substation-class transformers alone are running 75 to 110 weeks before anyone pours concrete.
Between 24 and 36 months, retrofit becomes real, but only under one condition, and I’ll get to it.
Beyond 36 months, with a balance sheet behind you, development is on the table.
Colocation
Right for anything under roughly 5 MW, anything with a date inside two years, and anything where the workload profile might still change on you.
What it costs you is position. You’re a price taker in a 1.4% vacancy market, and rents rose 8.3% in the first half of 2026 alone for users in the 3 to 10 MW band. Sign a three-year term today and you renew into whatever this market looks like in 2029.
The mistake I see most often is shopping rate. Rate is the least negotiable term on the sheet right now. Negotiate the expansion right, the definition of redundancy you’re actually buying, and the remedy when the operator misses an energization milestone. Those three are worth more over the term than eight dollars a kW.
Retrofit
Right for exactly one situation. You already own or control a site that has power: an existing substation, a live interconnect, a retiring industrial load, a mine, a mill, a fab.
If you hold the power position, retrofit is often the fastest path to megawatts available anywhere in this market, and it stays underused because the buildings look wrong to people who evaluate buildings. Riot Platforms is the public example. Same land, same substation, same interconnect it held as a miner, and the position repriced on a twenty-year lease once a credit tenant wanted the megawatts.
If you don’t already hold the power, retrofit is development with a worse floor plan, and you should not do it.
The honest math: the shell is cheap and the electrical is not. Assume you rebuild the entire electrical and mechanical plant. What you are buying is the interconnect and the permits.
Development
Right for 20 MW and up, a 36-month-plus horizon, and an owner who wants the asset on the balance sheet rather than in the expense line.
Development is the only one of the three that gets you a cap rate on the exit. It is also the only one where a regulatory change can take the whole thing away from you, and as of June 2026 the interconnection rulebook is formally open in all six RTOs after FERC’s show cause orders.
Do not start a development because colocation quoted high. Start one because you want to own the power position for the next twenty years.
The table
| Colocation | Retrofit | Development | |
|---|---|---|---|
| Time to power | 3 to 12 months | 18 to 30 months, if power exists | 36 to 60 months |
| Capital | Operating expense | Moderate capex | Heavy capex |
| Control of the power position | None | Full | Full |
| Fits | Under 5 MW, roadmap still moving | Anyone already holding an interconnect | 20 MW and up, patient capital |
| How it usually fails | Renewing into a tight market | Assuming the shell saves money | The energization date moves |
The question underneath all three
Do you own a power position, or are you renting someone else’s?
If you don’t own one and can’t get one on your timeline, you are a colocation tenant, and the job is to negotiate a lease that survives 2029. If you do own one, the question stops being about buildings and becomes how much of that option value you want to keep rather than sell.
Everything else in this decision is downstream of that answer.
Sources
- CBRE, North America Data Center Trends H1 2026, published August 27, 2026. Primary-market vacancy 1.4%; more than 80% of under-construction capacity preleased; under 1,500 MW available for pre-leasing across primary markets; asking rents up 8.3% for 3 to 10 MW requirements.
- Terrapin Construction Group, switchgear, transformer and generator lead times, 2026.
- Federal Energy Regulatory Commission, Section 206 show cause orders to all six RTOs/ISOs on large load interconnection, June 18, 2026.