CBRE: North American Data Center Vacancy Rates at Record Low Despite Booming Supply

(Image courtesy of CBRE)

CBRE, Dallas, found North American data center supply grew strongly in the first half of 2024, but availability continued to tighten as demand related to cloud computing and artificial intelligence more than offset the new supply.

“The trend has been consistent over the past two years: Demand for data center capacity far exceeds supply, which continues to drive up pricing in a material way,” said Pat Lynch, Executive Managing Director and Global Head of CBRE Data Center Solutions. “Based on the preleasing numbers in this report and forecasts for demand, we expect to see this imbalance continue for several more quarters.”

There was 515 MW of new supply added in the eight primary North American data center markets in the first half of 2024, upping the inventory of those markets by 10% from year-end 2023 and 24% year-over-year.

However, vacancy rates fell to a record low of 2.8%, compared with 3.3% for the same period in 2023.

Construction also continues to grow–there was 3,871.8 MW under construction–up 69.2% from the year before. Nearly 80% of that coming supply has been preleased.

Average rentals rates were at $174.06 per kW/month, up 6.5% from year-end; CBRE anticipates that growth will continue.

Regionally, Northern Virginia was the largest data center market in the first half of the year, with 2,611.1 MW of inventory and 108.1 MW of total absorption.

The second largest market currently is Dallas/Fort Worth, with 591 MW of inventory and 41.3 MW of absorption, followed by Chicago at 589.6 MW of inventory and 30.5 MW of absorption.

Two markets saw significant leasing activity–Hillsboro, Ore., with 171.2 MW absorbed, up 120% year-over-year, and Phoenix, with 148.1 MW absorbed, up 238% year-over-year.