CBRE Report: North American Data Center Market Sees Record Low Vacancy Despite Increased Supply in H1 2022

The North American data center market added significant new supply in the first half of 2022, but overall vacancy declined to a record low, fueled by increased demand from large cloud service providers, social media companies and enterprise users, according to CBRE.

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. Silicon Valley, which ranked sixth among the primary data center markets for 2021 net absorption, jumped to the second spot with 56.2 MW of activity in the first half of 2022.

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.

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.