CBRE Report: Silicon Valley Ranks Third in North America for Data Center Leasing Activity in 2022

Data center leasing activity, construction and new deliveries in Silicon Valley were among the highest in North America according to a new report from CBRE.

Silicon Valley ended the year with 62.4 megawatts (MW) of net absorption, the third highest in North America and Silicon Valley’s highest tally since 2014.

Silicon Valley’s construction pipeline in 2022 was the largest ever. More than 141 MW was under construction at the end of 2022, 66% of which was pre-leased. There were 66 MW of new deliveries in 2022, up significantly from 21.5 MW of deliveries in 2021, and the market’s inventory now totals 379.6 MW.

Despite adding more supply, rental rates remained the highest in the nation at $155-$250 per kW per mo, up from $135-150 per kW per mo in 2021. Data center vacancy in Silicon Valley was 2.3%, up slightly from H1 2022, which can be attributed to consolidation from second-generation space and a shift to cloud, but still the third lowest in North America.

“Limited land and power supply has led some providers to move from Santa Clara to neighboring parts of Silicon Valley, where there are redevelopment opportunities. Despite the uncertainty of the macroeconomic environment and rising construction costs, providers are eager to find ways to meet demand as it continues to outpace supply,” said Jerry Inguagiato, a senior vice president with CBRE’s Data Center Solutions group in the Bay Area.

National Trends

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 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.

                                              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).

To view the full report, click here.

*The seven primary U.S. data center markets are Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix, New York Tri-State and Atlanta.