The Lone Star State's Data Center Moment
Texas has arrived as the clear number two data center construction market in the United States, and the gap between Texas and the pack behind it is widening. With approximately 800 megawatts of capacity currently under construction and another 1.5 gigawatts in various stages of planning and permitting, the state has established itself as the primary alternative to Virginia for operators seeking large-scale data center capacity.
The drivers are straightforward: abundant and relatively inexpensive electricity, business-friendly permitting environments, no state income tax, a deep labor pool across the construction trades, and a state government that has made data center attraction a priority through aggressive tax incentive programs. What makes Texas particularly interesting from a construction perspective is the breadth of activity — projects are underway in DFW, San Antonio, Austin, and several smaller markets, each offering different advantages and challenges.
This article provides a detailed overview of every major data center project currently permitted, under construction, or recently completed in Texas, organized by market. For contractors and suppliers evaluating the Texas data center opportunity, this is the most comprehensive current inventory available.
Dallas-Fort Worth — The Established Giant
The Dallas-Fort Worth metroplex is the largest and most mature data center market in Texas, with an installed base of over 700 megawatts and significant new construction underway. The market benefits from DFW International Airport (which provides convenient access for data center operators' technical staff), a central U.S. location that provides low-latency connectivity to major population centers, and a deep pool of construction and technical talent.
Major Projects Under Construction
CyrusOne / KKR — Red Oak Campus: The most significant single project in the DFW market is CyrusOne's (now owned by KKR) massive campus in Red Oak, south of Dallas. The development is designed to deliver approximately 300 megawatts of IT capacity across multiple phases. Phase one, delivering roughly 60 megawatts, was completed in late 2025. Phase two construction is actively underway, with phases three through five in design and permitting.
The Red Oak project is notable for its scale — at full buildout, it will be one of the largest data center campuses in the country — and for its approach to power, which includes dedicated on-site generation to supplement grid power from Oncor.
Digital Realty — Richardson Expansion: Digital Realty continues to expand its long-standing Richardson campus, with two new buildings under construction adding approximately 40 megawatts of colocation capacity. The Richardson location benefits from proximity to the Dallas fiber hub and established infrastructure.
QTS / Blackstone — Irving: QTS (owned by Blackstone) is expanding its Irving campus with a new building adding approximately 36 megawatts of IT capacity. The project is on track for completion in mid-2026 and represents continued investment in a market that QTS has served for over a decade.
Compass Datacenters — Multiple Sites: Compass has become one of the most active developers in the DFW market, with new builds underway in Garland and Red Oak. The company specializes in build-to-suit facilities for hyperscale operators and has delivered multiple projects to tenants including cloud and AI companies.
Flexential — Plano: Flexential is building a new 30-megawatt facility in Plano that will serve mid-market enterprise and cloud customers. The project represents the company's expansion strategy in high-growth Sun Belt markets.
Suburban Sprawl
One notable feature of DFW data center construction is its geographic dispersion. Unlike Northern Virginia, where construction is concentrated in a small number of communities, DFW data center projects are spread across more than a dozen suburbs and exurbs, each with its own permitting requirements and utility service arrangements. This dispersion creates logistical complexity for contractors serving multiple projects but also reduces the political friction that has emerged in more concentrated markets.
San Antonio — The Dark Horse
San Antonio has quietly emerged as one of the fastest-growing data center markets in Texas and the country. The city offers a combination of advantages that are particularly attractive to data center operators: cheap and reliable power from CPS Energy (the nation's largest municipally owned electric utility), relatively low land costs, proximity to military and government installations, and a supportive local government.
CPS Energy Advantage
CPS Energy's average industrial rate of approximately $0.06 to $0.08 per kWh is among the lowest of any major metro area in the country. For data centers, where electricity is the single largest operating expense, this price advantage translates into millions of dollars in annual savings compared to markets like Virginia or Arizona. CPS Energy has also demonstrated a willingness to work collaboratively with data center operators on dedicated infrastructure, including building new substations and transmission lines to serve large facilities.
Major Projects
Microsoft — San Antonio Campus: Microsoft has operated data centers in San Antonio for over a decade and continues to expand its local presence. The current expansion adds approximately 250,000 square feet of new capacity, with additional phases planned. Microsoft's San Antonio operations support its Azure cloud platform and its government cloud services (Azure Government), which benefit from the city's proximity to military installations.
Compass Datacenters — San Antonio: Compass has broken ground on a new campus in San Antonio designed to serve hyperscale tenants. The initial phase will deliver approximately 40 megawatts of IT capacity, with the site planned for up to 200 megawatts at full buildout.
Rackspace / Private Cloud Expansions: Rackspace, headquartered in San Antonio, continues to invest in its local data center infrastructure, though the company's shift from managed hosting to hybrid cloud services has changed the nature of its construction program.
New Entrants: Several colocation and wholesale operators have announced plans to enter the San Antonio market, attracted by the power cost advantage and CPS Energy's capacity. These projects are in earlier planning stages, but the pipeline suggests significant construction activity in 2027 and beyond.
Austin — Constrained but Active
Austin's data center market is smaller than DFW or San Antonio, constrained by the same power and water challenges that affect the city's broader growth trajectory. Austin Energy, the municipal utility, has limited capacity for large new loads, and the region's ongoing drought concerns have raised questions about the availability of water for evaporative cooling.
Despite these constraints, several significant projects are underway or planned.
Meta — Austin Area: Meta's Austin-area data center campus continues to expand, though the company has been relatively quiet about the specifics of its construction program. The campus supports Meta's social media, messaging, and AI platforms.
Ascent — Austin: Ascent has acquired land and begun site preparation for a new data center in the Austin metro area, targeting the growing demand from technology companies headquartered or heavily concentrated in Austin.
Multiple Colocation Operators: Several mid-size colocation operators, including DataPoint and Stream Data Centers, have expanded or announced new builds in the Austin area to serve the city's large technology sector.
Temple and Midlothian — The Hyperscale Bets
Two of the most significant data center construction projects in Texas are located outside the state's major metro areas, reflecting the hyperscale operators' willingness to go wherever power, land, and incentives align.
Meta's Temple Campus
Meta's data center campus near Temple, approximately 70 miles north of Austin, represents one of the largest single-project investments in Texas data center construction. The $800 million campus covers approximately 900,000 square feet and is designed to support Meta's computing infrastructure for AI training and content delivery.
The Temple project is significant for several reasons beyond its size. The community is much smaller than the major metro markets where data centers are typically built, which has created both opportunities (enthusiastic local government support, available land, willing utility) and challenges (limited local construction workforce, minimal existing infrastructure).
At peak construction, the Temple project requires approximately 2,000 workers — a significant number in a community of 80,000. Meta and its general contractor have established per diem and housing programs to attract workers from the DFW metro area and other markets, and the project has created substantial economic activity for the local community.
Google's Midlothian Facility
Google's Midlothian data center, located approximately 30 miles south of Dallas, represents the company's first major Texas data center investment. The facility is under active construction and will deliver significant computing capacity for Google's cloud and AI platforms.
Midlothian's selection reflects Google's methodical approach to site selection, which emphasizes reliable power, water availability for cooling, community receptiveness, and access to construction labor. The Ellis County location provides proximity to the DFW labor market while avoiding the premium land costs and political complications of building within the metro's more developed suburbs.
Texas Tax Incentives
Tax incentives have played a significant role in Texas's data center growth, and understanding these programs is important for anyone evaluating the market.
Chapter 313 / Chapter 403
Texas's Chapter 313 property tax abatement program, which expired in 2022, was responsible for attracting billions of dollars in data center investment by offering significant property tax reductions for qualifying projects. The program's successor, Chapter 403 (enacted in 2023), continues to provide property tax incentives for large-scale capital investments, including data centers.
Under Chapter 403, qualifying data center projects can receive property tax limitations on appraised value for up to 10 years, with the specific terms negotiated between the developer and the local school district. The value of these incentives can be substantial — for a $1 billion data center campus, property tax savings over the life of the agreement can exceed $100 million.
Sales Tax Exemptions
Texas also provides sales tax exemptions for data center equipment, including servers, storage systems, networking equipment, and cooling systems. This exemption can save operators 6.25 percent or more on equipment purchases that typically represent 30 to 40 percent of total project cost.
Local Incentives
Many Texas municipalities and counties offer additional incentives, including fee waivers, expedited permitting, infrastructure cost-sharing, and local tax abatements. These incentives vary significantly by location and are typically negotiated on a project-by-project basis.
The ERCOT Factor
Any discussion of Texas data center construction must address the state's independent electrical grid, operated by ERCOT. The February 2021 winter storm that caused widespread power outages and billions of dollars in damage highlighted the vulnerability of the Texas grid, and the event has had lasting implications for data center construction in the state.
Reliability Concerns
Data center operators require extremely high power reliability — typically 99.999 percent uptime or better — and the 2021 storm raised legitimate questions about whether ERCOT can deliver this level of reliability. Since the storm, the state has implemented grid hardening measures, including weatherization requirements for generators and critical infrastructure, expanded reserve margins, and new demand response programs.
Despite these improvements, most data center operators building in Texas have responded by over-investing in backup power systems. Where a Virginia data center might install N+1 backup generation (enough generators to handle the full load plus one spare), Texas facilities are increasingly designed with 2N backup generation and extended fuel storage (72 to 96 hours instead of the typical 24 to 48 hours). This additional backup capacity adds $2 million to $5 million per megawatt to construction costs.
Demand Response Requirements
ERCOT has implemented interconnection requirements that mandate data center operators participate in demand response programs, meaning they must be able to reduce their grid consumption during periods of extreme demand. This requirement has implications for data center design, requiring sophisticated load management systems and, in some cases, on-site generation that can offset grid dependence during peak periods.
What This Means for Contractors
Texas's data center construction market offers significant opportunities for construction firms at every level, but it also presents unique challenges.
Scale of opportunity: With over 2 gigawatts of capacity either under construction or in planning, Texas represents the second-largest data center construction pipeline in the country. For GCs, MEP subs, and specialty trades, the pipeline is deep and growing.
Labor competition: The data center boom is competing for workers with Texas's already robust construction market, including residential, commercial, industrial, and infrastructure projects. Contractors serving the data center market need to offer competitive wages and working conditions to attract and retain skilled trades, particularly electricians and mechanical workers.
Geographic spread: Unlike Virginia's concentrated market, Texas data center construction is spread across a wide geographic area. Contractors need the logistics capability to serve projects from DFW to San Antonio to Temple, often simultaneously.
Incentive complexity: Navigating Texas's tax incentive programs requires specialized knowledge. Contractors and developers who understand the incentive landscape can use it as a competitive advantage in pursuing work.
For more on how the data center boom fits into the broader construction economy, see our 2026 construction spending forecast, which projects total U.S. construction spending at $2.1 trillion.
The Outlook
Texas's position as the number two data center market is secure for the foreseeable future, and the state has a realistic path to closing the gap with Virginia over the next five to ten years. The combination of available power (particularly if ERCOT continues to add generation capacity and improve reliability), business-friendly governance, competitive costs, and aggressive incentives makes Texas an increasingly attractive alternative to Virginia's constrained market.
For construction firms, the message is clear: Texas data center construction is not a wave — it is a structural shift in the state's construction market that will persist for at least a decade. The firms that invest in developing data center expertise and establishing relationships with the operators and developers driving this market will be well-positioned for sustained growth.
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