CBRE Report: Central Texas Data Center Market Vacancy is Second Lowest in North America

09 Sep 2021

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AUSTIN – Sept. 9, 2021 –  The Austin/San Antonio data center market had the second lowest vacancy rate in North America in the first half of 2021, according to CBRE’s latest North American Data Center Trends Report.

Despite the addition of 4.0 megawatts (MW) of data center space in H1 2021, the market has the second-tightest vacancy rate in North America at 3.1 percent, behind only Silicon Valley (1.6 percent). There was 3.4 MW of net absorption in the first half of 2021 – a measure of net leasing activity – down 43.3 percent year-over-year. Absorption should increase in the second half of 2021 with 31.5 MW currently under construction.

“The Central Texas colocation market is incredibly competitive right now due to the lack of available product, but that should be alleviated by recent activity, including Switch’s acquisition of over 30 acres of land in Round Rock,” said Mikey Jaillet, associate, CBRE. “The influx of recent acquisitions in the area shows that Central Texas is viewed as a contender for national data center transactions.”

National Trends

North American data centers saw a growth in construction and net absorption in this year’s first half as cloud service providers and social media companies drove demand, according to CBRE.

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 used is leveling out, so demand for data centers will increase across both primary and secondary markets,” said Pat Lynch, Senior Managing Director, Data Center Solutions, CBRE. “Hyperscale users are beginning to position themselves closer to end users to support technologies including 5G, artificial intelligence and blockchain technology. As this interest in edge computing and edge data centers continues, we expect 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 at the end of the second quarter, 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).

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

 

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.