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Report: Hillsboro Ranks Fourth in U.S. for Data Center Leasing Activity and New Supply in H1 2022

Hillsboro, CBRE, North American Data Center Trends Report, Northern Virginia, Silicon Valley

HILLSBORO, ORE. – October 10, 2022 – The Hillsboro, Ore. data-center market ranked fourth in the U.S. and first among secondary markets for leasing activity in the first half of 2022, fueled by increased demand from social media companies, according to a new report from CBRE.

Overall, the market had 37 megawatts (MW) of net absorption in H1 2022, already surpassing the 21.2 MW of net absorption recorded in all of 2021.

The appetite for data center space in Hillsboro shows no signs of slowing down. Vacancy rates dropped to 7.0 percent from 15.2 percent year-over-year despite the addition of 30 MW of new supply in H1 2022 (fourth most in the U.S.). The Hillsboro market will remain tight for the foreseeable future as 87 percent of the 228.8 MW of space under construction has been preleased. The delivery of this space will nearly triple Hillsboro’s inventory, which currently stands at 139.4 MW.

“Hillsboro has become a very attractive data center market due to its growing collection of colocation facilities, expansive fiber network infrastructure, access to Asia-Pacific undersea cables, and proximity to a primary internet exchange point,” said Josh Ruttner, Senior Research Analyst, Data Center Solutions, CBRE. “As a result, available land has become increasingly scarce.”

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.”

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.

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).

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 2021 revenue). The company has more than 105,000 employees (excluding 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.