Dallas-Fort Worth Ranks Sixth for Data Center Leasing Activity in First Half of 2022

The Dallas-Fort Worth data-center market saw significant leasing activity in the first half of 2022, fueled by increased demand from large cloud service providers and social media companies, according to a new report from CBRE.

Overall, the market had 25.9 MW of net absorption in H1 2022, an increase of 22.2 MW from H1 2021. The market’s absorption – a measure of net leasing activity – ranked sixth year-over-year among the 16 data center markets that CBRE tracks.

Supply continued to be an issue in DFW as the appetite for data center space shows no signs of slowing down. Vacancy rates dropped to 6.9 percent from 18.5 percent in H1 2021. The DFW market will remain tight for the foreseeable future as 90 percent of the 240 MW of space under construction has been preleased.

“What we are currently seeing in the Dallas-Fort Worth data center market is truly unprecedented,” said Chris Herrmann, senior vice president with CBRE’s Data Center Solutions group in Dallas. “The strong absorption in the first half of 2022 coupled with the tremendous amount of preleasing activity speaks to the demand we’re seeing and the amount of data center construction that is needed to continue to serve the growing needs of large hyperscale and enterprise users.”

National Trends

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

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.