Commercial Real Estate News
Cloud Services, Social Media Driving U.S. Data Center Demand in 2021
According to CBRE, North America's data-center market made gains in construction and net absorption in the first half of 2021, as cloud service providers like Amazon AWS, Google Cloud, and social media companies like Facebook, Twitter and LinkedIn drove demand.
CBRE's latest North American Data Center Trends Report shows that providers brought 214.3 megawatts (MW) of new wholesale colocation supply online in the seven primary U.S. data center markets in the first half of 2021, an increase of 7 percent from the year-earlier period. However, vacancy remained low across those markets - as scant as 1.6 percent in Silicon Valley - amid persistent demand.
Relief from tight vacancies likely will come from the 527.6 MW of capacity currently under construction in primary markets. That figure marks a 42 percent increase from a year earlier.
"We've seen no indication that the amount of data created and utilized is leveling out, so demand for data centers likely will continue increasing across both primary and secondary markets," said Pat Lynch, CBRE Executive Managing Director, Global Head of Advisory & Transaction Services, Data Center Solutions. "Users are beginning to position themselves closer to end users to support technologies including 5G, artificial intelligence and edge-computing technology. We continue to see a heavier appetite for data centers from investors who are starting to view data centers in the same category as more traditional real estate sectors."
Top North American Data Center Markets
Northern Virginia remained the most active data center market with net absorption of 70.6 MW in H1 2021 - more than triple that of Phoenix, the next highest market.
Net absorption totaled 142.7 MW across the seven primary markets in the first half, an increase of 3.4 percent from the first half of 2020.
Data center users leased more space in the first half of 2021 than in H2 2020 despite fewer deals being signed during this period. Phoenix saw more leasing activity in Q2 2021 than any other quarter in the previous five years. However, several markets, including Northern Virginia and Dallas, saw a drop in absorption year-over-year as some users consolidated their operations.
Of the construction underway in primary markets at second quarter's end, 317 MW (60 percent) has been preleased. Markets with notable pre-leasing activity include Silicon Valley, where 70 MW (82 percent) of the total MW under construction was spoken for, as well as Dallas (17.5 MW), Chicago (17.1 MW), New York Tri-State (13.1 MW), Phoenix (6 MW) and Atlanta (3.5 MW).
