Central Texas Ranks Tenth for Data Center Leasing Activity in First Half of 2022
October 6, 2022
The data-center markets in Austin and San Antonio saw a significant increase in new construction in the first half of 2022, fueled by increased demand from a diverse mix of users, according to a new report from CBRE.
Supply continued to be an issue across Central Texas as the appetite for data center space shows no signs of slowing down. Vacancy rates dropped to 1.3 percent—which is tied with Silicon Valley for the lowest across North America—from 3.1 percent in H1 2021. This should be alleviated moving forward with several operators having space under construction, totaling 75.5 MW.
Overall, the market had 4.9 MW of net absorption in H1 2022, an increase from the 3.4 MW in H1 2021. The market’s absorption ranked tenth year-over-year among the 16 data center markets that CBRE tracks.
“The Central Texas market continues to be viewed favorably by both the investor and end user communities,” said Brant Bernet, senior vice president with CBRE’s Data Center Solutions group. “As more capacity is delivered across Central Texas, we expect the record-low vacancy rates to improve and leasing activity to increase as large quantities of space will finally be available to lease across the market.”
CBRE’s latest North American Data Center Trends Report found that 352.9 megawatts (MW) of new supply went online in the seven primary U.S. data center markets* in the first half of 2022, a 20 percent increase year-over-year.
Despite the influx of additional capacity, data center vacancy decreased to an average of 3.8 percent across the seven primary markets in H1 2022—down from 10.3 percent in H1 2021—as large cloud users raced to secure space to accommodate anticipated future growth. Significant preleasing of space under construction in prior years also contributed to the large drop in vacancy.
For the first time since 2017, tight market conditions caused average asking rents to increase in both primary markets (5.9 percent to $127.50 per kW) and secondary markets (2.3 percent to $133.00 per kW). Primary-market vacancy will remain tight for the foreseeable future, as 73 percent (1,170 MW) of the 1,601.5 MW of the under-construction supply was preleased as of the end of H1 2022.
“Supply chain disruptions and a lack of available power and land in some major markets could delay new construction deliveries over the balance of the year and beyond,” said Pat Lynch, Executive Managing Director, Global Head of Advisory & Transaction Services, Data Center Solutions, CBRE. “As a result, we expect continued rising rents nationally, and more occupiers turning to secondary and tertiary markets to meet their needs. These smaller markets will also continue to benefit from an increase in edge data center deployments, driven by broader adoption of AI, 5G and blockchain technologies.”
Top U.S. Data Center Markets
Northern Virginia remained the most active data center market with net absorption of 269.3 MW—a 281 percent increase from H1 2021—and more than quadruple that of Silicon Valley, the next highest market. Net absorption totaled 453.4 MW across the seven primary markets in the first half of 2022, nearly triple that of the first half of 2021.
Top 10 Most Active Markets
|Market||H1 2022 Net Absorption||Market||H1 2022 Net Absorption|
|Northern Virginia||269.3 MW||Dallas/Ft. Worth||25.9 MW|
|Silicon Valley||56.2 MW||New York Tri-State||16.0 MW|
|Phoenix||46.3 MW||Chicago||9.7 MW|
|Hillsboro||37.0 MW||Southern California||7.9 MW|
|Atlanta||30.0 MW||Austin/San Antonio||4.9 MW|
Northern Virginia (219.5 MW) accounted for 62 percent of new primary-market supply delivered in H1 2022. Other markets with notable supply growth in the first half of the year included Silicon Valley (56.0 MW), Phoenix (37.5 MW), Hillsboro, Ore. (30.0 MW), and Atlanta (20.0 MW).
To download the 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.
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.