Dallas, TX

Dallas-Fort Worth Records Unprecedented Data Center Leasing Activity in First Half of 2023

September 12, 2023

Close up of cables in a data center

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Activity from artificial intelligence (AI) and large cloud service providers drove unprecedented data center leasing activity in Dallas-Fort Worth (DFW) in the first half of 2023, further cementing the region as one of the top data center markets in North America, according to a new report from CBRE.

Dallas-Fort Worth had the highest increase in net absorption year-over-year across major markets, recording 110.6 megawatts (MW) of data center space leased in the first half of 2023. This marks a 497% increase compared to the second half of 2022 and a 327% year-over-year increase from H1 2022. The market’s absorption – a measure of net leasing activity – was the second highest among the 18 data center markets that CBRE tracks.

Despite the record-breaking 107.2 MW of new supply delivered in H1 2023, data center vacancy decreased from 6.9% to 4.1% year-over-year. 90.2% of the 273.3 MW currently under construction has been preleased, putting additional pressure on developers to bring new data center space to the market. Nationally, companies are leasing space up to 36 months in advance of construction completion.

“DFW has established itself as the second largest data center market in the country with the consistent construction, deliveries and deal activity over the past year,” said Brant Bernet, senior vice president with CBRE’s Data Center Solutions group in Dallas. “We anticipate record low vacancies to continue as companies are scrambling to secure new land and order new equipment and building materials.”

DFW measured behind only Northern Virginia for the largest increase in inventory growth among major markets, jumping to 499.4 MW in H1 2023 from 375.8 MW in H1 2022 (32.9% year-over-year growth).

“The lack of available data center space in DFW as well as all other major markets has become more pronounced over the last six months because of increased hyperscale and AI absorption,” said Chris Herrmann, senior vice president with CBRE’s Data Center Solutions group in Dallas. “We expect demand to remain strong with AI driving leasing opportunities as developers are now having to look for land in different DFW submarkets that previously were not considered for data center use.”

National Trends

CBRE’s latest North American Data Center Trends Report found there is 2,287.6 megawatts (MW) of data center supply currently under construction, reaching a new all-time high with more than 70% already preleased. At the same time last year, there was 1,830.3 MW under construction. In anticipation of future demand and to secure data center space at current pricing, companies are leasing space up to 36 months in advance of construction completion.

Absorption in the eight primary U.S. data center markets remained resilient in H1 2023, totaling 468.8 MW, despite challenges within the supply chain. While supply increased 19.2% year-over-year, vacancy remains near a record low of 3.3%. Strong demand paired with a lack of available power and extended timelines have kept asking rental rates climbing. Average primary market asking rents rose to $147.80 per kW/month from $127.50 (a 15.9% year-over-year increase).

Top Data Center Markets

Northern Virginia remained the most active data center market in the first half of 2023 with 918 MW under construction. The market set a record low vacancy rate of 0.94% while power improvement projects are underway.

Top 10 Most Active Markets

Market H1 2023 Total Inventory H1 2023 Under Construction
Northern Virginia 2,254.1 MW 918 MW
Hillsboro 248.4 MW 267.3 MW
Silicon Valley 410.7 MW 125 MW
Chicago 367.5 MW 205 MW
Dallas - Fort Worth 499.4 MW 273.3 MW
Phoenix 360 MW 163.5 MW
Toronto 291.3 MW 99.6 MW
New York Tri-State 177.5 MW 99.9 MW
Atlanta 271 MW 235.6 MW
Montreal 135.5 MW 106.5 MW

Other market highlights include Dallas/Fort Worth, which saw the greatest year-over-year increase in absorption of 327%, jumping to 110.6 MW from 25.89 MW. Separately, Chicago recorded a 125% spike in under-construction activity - the largest increase among all U.S. data center markets.

To view the full report, click here.

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

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 2023 revenue). The company has more than 130,000 employees (including 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.