Commercial Real Estate News
U.S. Data Center Demand Explodes in U.S., Driven by AI Growth in 2023
According to new research by CBRE, demand for data center space overshadowed economic uncertainty and concerns around power availability in the first half of the year. Construction of North American data centers is at an all-time high in part due to the continued growth of artificial intelligence.
CBRE's latest North American Data Center Trends Report found there is 2,287.6 megawatts (MW) of data center supply currently under construction in primary markets, reaching a new all-time high with more than 70% already preleased. At the same time last year, there was 1,830.3 MW under construction. Companies are leasing space up to 36 months in advance of construction completion in anticipation of future demand and to secure data center space at current pricing.
"Data center construction is at an all-time high, driven by strong demand from all users, including AI, hyperscale and enterprise," said Pat Lynch, executive managing director for CBRE's Data Centers Solution. "New and existing uses of artificial intelligence cases grew tremendously in the first half of the year, and we expect demand to remain strong with AI driving leasing opportunities in the second half of the year."
Absorption in the eight primary U.S. data center markets remained resilient in H1 2023, totaling 468.8 MW despite challenges within the supply chain. While supply increased 19.2% year-over-year, vacancy remains near a record low of 3.3%. Strong demand paired with a lack of available power and extended timelines have kept asking rental rates climbing. Average primary market asking rents rose to $147.80 per kW/month from $127.50 (a 15.9% year-over-year increase).
Top Data Center Markets
Northern Virginia remained the most active data center market in the first half of 2023 with 918 MW under construction. The market set a record low vacancy rate of 0.94% while power improvement projects are underway. Separately, Chicago recorded a 125% spike in under-construction activity - the largest increase among all U.S. data center markets.
"Most major markets are grappling with power constraints, and developers are facing challenges within their supply chain, but it's not slowing down the demand for data center space," said Gordon Dolven, director of Americas Data Center Research at CBRE. "Data center operators are prioritizing power availability, rather than selecting markets based on traditional factors such as location, connectivity, water and land pricing."
Other market highlights include Dallas-Fort Worth, which saw the greatest year-over-year increase in absorption of 327%, jumping to 110.6 MW from 25.89 MW. Hillsboro also experienced the largest inventory growth of all primary markets, increasing to 248.4 MW from 139.4 MW (78% year-over-year growth).
Top 10 Most Active Markets
