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Northern Virginia Data Center Market Sets Record-Low 0.94% Vacancy Rate; Emerging Areas of Data Center Activity and Growth Appear in Fauquier, Culpeper, Stafford, and Spotsylvania Counties

September 11, 2023

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Ashley Houk

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Strong demand and limited available supply led to Northern Virginia setting a record low 0.94% vacancy rate in the first half of 2023, according to a new report from CBRE.

Despite supply chain delays, Dominion Energy continues to make strides on upgrading transmission and distribution infrastructure, fueling regional growth. Hyperscalers’ leasing volume remains robust with 192.8 megawatts (MW) absorbed in Northern Virginia in the first half of 2023 as they seek capacity where power is currently or soon to be available.

Meanwhile, developers and end-users continue to look for new development sites within the state. Data center activity remains highest in Loudon County and Prince William County, but growth is emerging in Fauquier, Culpeper, Stafford, and Spotsylvania counties due to supply constraints.

“With limited available supply in the Northern Virginia core, more end-users are evaluating peripheral submarket viability, which is driving inquiries to new locations,” says Jamie Jelinek, senior vice president within CBRE’s Data Center Solutions group. “Ultimately, the emergence of a new submarket will depend on end-user commitments. The tightening vacancy in Loudoun and Prince William counties has also accelerated rental rate growth in those submarkets.”

Inventory in Northern Virginia increased by 346 MW year over year to 2,254.1 MW from 1,908.1 MW in H1 2022. The volume of projects under construction remains strong at 918 MW, largely driven by developers fulfilling previously signed forward lease commitments.

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-Fort Worth, 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.