Hillsboro saw the highest leasing activity across all secondary markets in North America while also registering the fourth most product under construction in the first half of 2021, according to CBRE’s latest North American Data Center Trends Report.
Hillsboro posted the largest net absorption total of any secondary market, with 14.7 megawatts (MW) of wholesale colocation space taken up during the first half 2021. During that time, inventory in the Hillsboro market climbed another 20.3 percent to 112.4 MW. The market also has 61.9 MW currently under construction, the fourth-highest across all markets covered in the report. Hillsboro’s growth is largely driven by access to clean, affordable power, and its proximity to major West Coast markets facing supply constraints.
“The blistering pace of new data center supply in Hillsboro is great news for our regional businesses and organizations who are struggling to keep up with ever-increasing data storage, computing and regulatory demands,” said Carlo Castoro, Associate, based out of CBRE’s Portland office. “Eventually, the lightbulb moment occurs when a company realizes that it can greatly reduce IT expenditures while simultaneously boosting security. Our clients are often shocked when we show them how many options there are for relocating their data functions off-site. By helping our clients navigate this complex and evolving landscape, we help them to focus more on their core business functions.”
North American data centers saw growth in construction and net absorption in this year’s first half as cloud service providers and social media companies drove demand, according to CBRE.
Providers brought 214.3 megawatts (MW) of new wholesale colocation supply online in the seven primary U.S. data center markets* in the first half of 2021, an increase of 7 percent from the year-earlier period. However, vacancy remained low across those markets – as scant as 1.6 percent in Silicon Valley – amid persistent demand.
Relief from tight vacancies likely will come from the 527.6 MW of capacity currently under construction in primary markets. That figure marks a 42 percent increase from a year earlier.
“We’ve seen no indication that the amount of data used is leveling out, so demand for data centers will increase across both primary and secondary markets,” said Pat Lynch, Senior Managing Director, Data Center Solutions, CBRE. “Hyperscale users are beginning to position themselves closer to end-users to support technologies including 5G, artificial intelligence and blockchain technology. As this interest in edge computing and edge data centers continues, we expect to see a heavier appetite for data centers from investors who are starting to view data centers in the same category as more traditional real estate sectors.”
Top North American Data Center Markets
Northern Virginia remained the most active data center market with net absorption of 70.6 MW in H1 2021 – more than triple that of Phoenix, the next highest market.
Net absorption totaled 142.7 MW across the seven primary markets in the first half, an increase of 3.4 percent from the first half of 2020.
Data center users leased more space in the first half of 2021 than in H2 2020 despite fewer deals being signed during this period. Phoenix saw more leasing activity in Q2 2021 than any other quarter in the previous five years. However, several markets including Northern Virginia and Dallas, saw a drop in absorption year-over-year as some users consolidated their operations.
Of the construction underway at the end of the second quarter, 317 MW (60 percent) has been preleased. Markets with notable pre-leasing activity include Silicon Valley, where 70 MW (82 percent) of the total MW under construction was spoken for, as well as Dallas (17.5 MW), Chicago (17.1 MW), New York Tri-State (13.1 MW), Phoenix (6 MW) and Atlanta (3.5 MW).
*The seven primary U.S. data center markets are Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix, New York Tri-State and Atlanta.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 2020 revenue). The company has more than 100,000 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.