Commercial Real Estate News
North American Data Center Leasing Rises 40 Percent to Record Levels in 2022
Vacancy rates hit record low as asking rents rise 14.5 percent
According to new data by CBRE, North American data center leasing reached record levels and vacancy fell to a record low in 2022, but constraints on building new data center capacity could hamper the sector's continued growth.
CBRE's latest North American Data Center Trends Report found that tight market conditions and escalating energy and construction costs caused primary-market average asking rents to increase 14.5% year-over-year to $137.90 per kW, the first year-over-year increase in pricing since 2017.
The seven primary U.S. data center markets* logged 686.9 megawatts (MW) of net absorption, up nearly 40% year-over-year. Despite a 17% increase in supply, vacancy fell to a record-low 3.2%. Two-thirds of the net absorption occurred in the first half of the year, as power and land constraints in certain markets, as well as construction delays, weighed on activity in H2 2022.
"Data center leasing slowed in the second half of 2022, but this was driven purely by a lack of available space and power constraints," said Pat Lynch, Executive Managing Director, Global Head of Advisory & Transaction Services, Data Center Solutions, CBRE. "Demand from enterprise users and cloud service providers remains very strong, particularly as companies continue to adopt hybrid work strategies and prioritize private cloud networks."
Top Data Center Markets
Northern Virginia remained the most active data center market with net absorption of 436.9 MW, with the market's vacancy rate falling to under 1%, despite significant power constraints.
"Northern Virginia has challenges with power availability over the next few years. This will benefit other markets that are expanding power capacity," said Gordon Dolven, Director, Americas Data Center Research, CBRE. "Atlanta, for example, has more than 1 gigawatt of planned capacity in the works, with new data center operators entering the market and competing with industrial developers for available land."
Top 10 Most Active Markets
Northern Virginia (371.5 MW) accounted for 65% of new primary-market supply delivered in 2022. Other markets with notable supply growth included Silicon Valley (66.0 MW), Hillsboro, Ore. (59.0 MW), Toronto (44.0 MW) and Phoenix (37.5 MW).
