Major U.S. Markets Are Getting 373 MW Of Data Center Construction
Data center inventory is poised to grow at a healthy clip next year, according to a new forecast from CBRE.
Across major U.S. markets, 373 megawatts of data center construction is currently in progress. That new supply will drive 13.8% growth in total data center inventory in 2021, the firm wrote in a real estate market outlook.
First-tier data center markets, such as Northern Virginia, Silicon Valley, Dallas and Chicago, will add the most total inventory next year. But second-tier markets that combine low electricity costs with favorable government incentives are poised to see the most growth, according to CBRE.
Northern Virginia, the largest data center market in the world, has 239 MW under construction; Atlanta has the second-most inventory under construction, at 28.5 MW. Phoenix has 28.1 MW under construction, while Silicon Valley has 24.6 MW.
The trends that drove a surge in hyperscale demand this year — namely, people flooding cloud services because of coronavirus lockdowns — will level off next year, according to CBRE. Meanwhile, enterprises will renew their colocation leases, though some are seeking shorter lease terms as they re-evaluate their IT spending for the long term.
Energy efficiency, considered a critical driver of the data center market, will remain a focal point for any provider looking to build or expand next year.
“Many providers are looking to expand in markets that offer affordable clean energy. Montreal and Hillsboro (Portland), OR provide hydroelectric power at rates well below those in other markets,” wrote Richard Barkham, CBRE’s global chief economist. “Data centers also stand to benefit from increased efficiencies with regards to power and energy storage.”
Financiers have poured billions into data center efficiency projects this year, as overall interest in data center investment has grown. Major data center REITs, such as Equinix and Digital Realty, have outperformed the broader market and other sectors of real estate, like offices and retail.
Colocation provider Aligned, for example, recently secured $1B in sustainability-related debt financing from leading investment banks, including TD Securities, Goldman Sachs, Deutsche Bank and others.