According to CBRE’s (NYSE: CBRE) latest North American Data Center Trends Report, the Austin/San Antonio data center market’s vacancy rate fell to an all-time low in 2020.
The commercial real estate services and investment firm, which is headquartered in Dallas, Texas, notes that despite the addition of 5.4 megawatts (MW) of data center space in 2020, at 2.8 percent, the Austin/San Antonio market has the second-tightest supply in North America, behind only Silicon Valley (2.3 percent).
The new report finds the market saw 6.8 MW of net absorption in 2020, down 46 percent from 2019, largely due to a lack of available inventory. However, CBRE thinks absorption for the Austin/San Antonio market should increase in 2021, what with 14 MW of data center space currently under construction -- 32 percent of which is pre-leased.
“The lack of competitive supply across Austin and San Antonio has created significant opportunities for data center operators to expand in or enter the market,” observed Brant Bernet, senior vice president, CBRE. “This expansion is important, as the continued growth of Austin’s tech sector, including relocations of businesses from other parts of the country, should increase data center demand.”
In terms of national trends, CBRE reports that, overall, data centers, one of the fastest growing real estate sectors pre-pandemic, remained strong in 2020 as businesses reconfigured their digital infrastructure to improve their remote work capabilities, and tech giants and cloud service providers raced to meet consumer and corporate demand, according to CBRE.
The firm’s latest research shows 329.6 MW of net absorption in 2020 across the seven primary U.S. data center markets. (According to CBRE, the seven primary U.S. data center markets are Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix, New York Tri-State and Atlanta.) While down 11 percent from the peak in 2019, the new report finds 2020 absorption was still higher than any other year on record. Meanwhile, vacancy fell to just 8.5 percent, despite an 11 percent growth in new supply.
“With data usage growing at an explosive rate, we expect data center demand to increase across both primary and secondary markets in 2021,” said Pat Lynch, senior managing director, Data Center Solutions, CBRE.
Lynch continued, “To capitalize on this growth, data center providers will look to deliver network and interconnection offerings to better connect business-critical applications, as well as to meet anticipated demand for evolving technologies like 5G, edge computing and the internet of things—all of which will further fuel the data center real estate market.”
CBRE: Top 10 Most-Active North American Data Center Markets
Market 2020 Absorption
No. Virginia 217.2 MW
Toronto 38.1 MW
Dallas-Fort Worth 33.7 MW
Silicon Valley 26.6 MW
Atlanta 18.2 MW
Phoenix 17.5 MW
Ctrl. Washington 14.5 MW
Chicago 13.1 MW
Seattle 6.9 MW
Montreal 11.0 MW
According to CBRE, the North American markets with the most data center space underway include Northern Virginia (283.5 MW), Montreal (57 MW), Silicon Valley (50.1 MW), Central Washington (43.7 MW), Hillsboro, Oregon (40.5 MW), and Chicago (33.7 MW).
The firm further notes that strong demand and an uptick in investor interest in direct investment, due to the strong performance of data center REITs in 2020, resulted in a 457.8-MW data center construction pipeline in the primary markets, up 62 percent from the end of 2019. More than half of the current pipeline is pre-leased, adds CBRE.
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.
Learn more at www.cbre.com.
