Data Centers Could be a Bright Star in Texas Construction for 2026 and Beyond

KEY POINTS

• According to a Texas construction supplier’s analysis, the state now leads the nation in commercial construction spending, at nearly $90 billion annually. 

• Data center megaprojects like Data City near Laredo and HyperGrid near Amarillo headline Texas’ outsized role in the global AI buildout, with nearly 20 additional projects underway or planned in the Austin area alone.

• Despite near-term construction opportunities, long-term challenges loom as data centers create limited permanent jobs while driving massive demand for electricity and water, adding infrastructure strain.

Texas Construction Industry Sees Growth from Data Centers and Manufacturing

According to an analysis by Twisted Nail, a Texas-based construction aggregate supplier, the Texas construction industry has much work to look forward to.

The company analyzed national and state-level data from the U.S. Census Bureau and found that today, Texas leads the nation in commercial construction spending, at nearly $90 billion annually—more than double any other state.

Federal incentives, low state taxes, manufacturing investments, and population growth fuel the continued vitality of the state’s construction industry. Clean energy, semiconductor, and advanced manufacturing projects account for much of that activity.

Further good news comes from the US Bureau of Labor Statistics, which projects job growth of 5.8 percent for skilled trade workers through 2034 and even higher levels for other construction workers. This is encouraging given how construction employment has flatlined across the country over the past six months to August.

The boom in data center development is an exceptionally bright star for Texas construction.

Data City, Texas: A 50,000-Acre Hyperscale Hub

One of the most extensive and interesting data facilities planned is the 50,000-acre data center hub near Laredo, dubbed “Data City, Texas,” announced by Houston-based Energy Abundance Development Corporation this past March.

The 50,000-acre Data City is intended to be fully self-powering and isolated from ERCOT, the state’s energy utility. 

“Data City offers a unique solution, achieving the holy grail of hyperscalers’ clean energy ambitions, delivering low-cost 100 per cent 24/7 green energy at scale,” the company said in a news release. 

The 50,000-acre Data City is intended to be fully self-powering and isolated from ERCOT, the state’s energy utility. Image: Energy Abundance Development Corp.

Although initially powered by Texas-produced natural gas, Data City proposes to shift to green hydrogen sourced from the company’s adjacent 2TWh Hydrogen City salt dome storage facility. Wind, solar, and batteries are also part of the plan. This way, Data City will be fully self-powering and isolated from ERCOT, the state’s energy utility.

The announcement says Data City will be built in phases, with the first 300 MW and one million square feet of data center space set to launch in 2026. It could expand quickly to 5 GW and over 15 million square feet of leasable space.

HyperGrid AI Campus: World’s Largest Energy and Data Complex

Even more ambitious is Fermi America’s planned $300 billion AI campus near Amarillo, Texas, called HyperGrid. If plans move forward, the 18-million-square-foot facility could generate 11 GW of IT capacity, powered by a combination of natural gas, solar, wind, and nuclear energy, making it the world’s largest energy and data complex.

Texas is getting a good piece of the $375 billion estimated by investment bank UBS that will be spent globally on AI infrastructure in 2025. As much as $500 billion of data center investments are projected in 2026, and an estimated $3 trillion by 2028. In fact, nearly 20 data center projects are underway or planned in the Austin area alone.

Stargate Project in Abilene

Smaller rural communities become excited about the economic prospects surrounding new data centers proposed for their area. However, while massive data centers mean short-term construction jobs and add revenue to local municipal tax rolls, the longer-term employment picture is not as rosy. Completed data centers don’t require a high number of long-term workers.

As reported in the Wall Street Journal, some 1,500 people, including site workers, electricians, and engineers, are involved in constructing Stargate Project’s data center covering 1,100 acres near Abilene, Texas. The Abilene facility is part of the $500 billion nationwide AI infrastructure venture involving OpenAI, SoftBank, Oracle, and the investment firm MGX.

However, Abilene’s economic development agency says the Stargate facility will hire only about 100 full-time employees, a fraction of the number who might work in a similarly sized commercial development like an office park, factory, or warehouse.

Nevertheless, the booming data center market is good news for the building industry, as other Texas construction areas take a pause due to economic uncertainty.

Demand Also Brings Challenges to Texas

According to Jones Lang LaSalle, a global commercial real estate and investment management company, vacancy rates in existing data centers are at a record low of 2.3 per cent nationwide and virtually zero in Texas. Strong preleasing through 2027 is expected to keep vacancy rates at low levels.

However, it isn’t all clear sailing. The future of Texas data center development is somewhat contingent on the availability of power and water.

Power Grid Capacity

Texas data centers used nearly 22 million MWh of electricity in 2023, 4.6 per cent of the state’s electricity consumption. ERCOT projects that by 2031, the state grid will need to more than double its 2024 capacity, mainly due to the growth of data centers. This suggests the importance of new data centers having some self-powering capability.

Water Supply Constraints 

What is even more challenging is the water supply required to cool processing servers, which amounts to millions of gallons every day for each facility. In a state that often faces drought conditions, this could set up conflicts between proposed data centers, agricultural and industrial users, and residential communities.

Building new data centers may be critical to the future success of the state’s construction industry. However, the limited long-term, large-scale employment potential, alongside the required power generation and water supply demands, present complex realities that need to be recognized over the coming years.

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