Northern Virginia Ranks No. 1 for Data Center Leasing Activity in 2022; Vacancy Drops Below 1% in New Record Low

Despite power and land restrictions, Northern Virginia continues to see strong demand, according to a new report from CBRE. Northern Virginia set a new record for a single year with 436.9 MW of absorption in 2022, including 167.5 MW of net absorption occurring in the second half of the year. Major cloud providers continue to fuel the majority of this growth.

Nationally, primary markets saw 686.9 MW of positive absorption in 2022, up 193.6 MW (39.1%) from 2021. Northern Virginia, the world’s largest data center market, accounted for 64% of this total. Operators expect Dominion Energy to provide significantly less power for development, but this bottleneck should normalize by 2026.

“Northern Virginia experienced a tremendous spike in leasing activity in early 2022, which resulted in tightening vacancy throughout the year. The second half of 2022 consisted of smaller pockets of capacity being leased, ensued by a fully occupied market by year end,” said CBRE Senior Vice President Jamie Jelinek. “This dynamic lead to significant prelease commitments for 2023 and 2024. As a result, we saw developers aggressively seek new development sites with appropriate entitlements and access to power.”

National Trends

CBRE’s latest North American Data Center Trends Report found that tight market conditions and escalating energy and construction costs caused primary-market average asking rents to increase 14.5% year-over-year to $137.90 per kW, the first year-over-year increase in pricing since 2017.

The seven primary U.S. data center markets* logged 686.9 megawatts (MW) of net absorption, up nearly 40% year-over-year. Despite a 17% increase in supply, vacancy fell to a record-low 3.2%. Two-thirds of the net absorption occurred in the first half of the year, as power and land constraints in certain markets, as well as construction delays, weighed on activity in H2 2022.

“Data center leasing slowed in the second half of 2022, but this was driven purely by a lack of available space and power constraints,” said Pat Lynch, Executive Managing Director, Global Head of Advisory & Transaction Services, Data Center Solutions, CBRE. “Demand from enterprise users and cloud service providers remains very strong, particularly as companies continue to adopt hybrid work strategies and prioritize private cloud networks.”

Top Data Center Markets

Northern Virginia remained the most active data center market with net absorption of 436.9 MW, with the market’s vacancy rate falling to under 1%, despite significant power constraints.

Top 10 Most Active Markets

Northern Virginia (371.5 MW) accounted for 65% of new primary-market supply delivered in 2022. Other markets with notable supply growth included Silicon Valley (66.0 MW), Hillsboro, Ore. (59.0 MW), Toronto (44.0 MW) and Phoenix (37.5 MW).

To view the full 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.