Data center construction rising in N.J., region, CBRE says

Data centers continue to be a critical part of the New Jersey region’s economy, according to a new report from real estate firm CBRE, which found that the tri-state market has seen a spike in construction.

In its newest North American Data Center Trends Report, the real estate firm said the New York Tri-State, which includes New Jersey, saw vacancy rates at data centers drop to 9.1% during the first half of 2020, the lowest level in years.

The financial sector, Fortune 500 companies and the COVID-related increase in remote work are behind the push, CBRE said. The shortage of available capacity led to just 1.1 megawatts of net absorption in H1 2020, down from 5.3MW during the year-earlier period.

That has led to 22.2MW of new construction underway, representing a nearly 15% increase on the total current inventory of 151.3MW.

“Digital Realty, the most active operator in the region, is capacity-constrained in New Jersey and will soon begin construction on a new 600,000-square-foot campus in Totowa, with the first building expected to be delivered in Q1 2022,” Jon Meisel, senior vice president for CBRE’s Data Center Solutions Group, said in a prepared statement. “The previously quiet Totowa colocation market will likely see an additional uptick in activity over the next two years.”

The New York Tri-State represents one of the seven major data center markets nationwide, CBRE said.

“The dramatic increase in remote working has reinforced the importance of data centers and the networks that support them, and we expect this trend to continue,” CBRE First Vice President William Hassan said in a statement. “Capital market activity should remain brisk with the monetization of enterprise-owned sites and a few net-leased assets.”

Nationally, the sector saw 134.9MW of net absorption in the first half of the year, down from record levels in both H1 2019 and H1 2018, but higher than the 2017 and 2016 periods. The vacancy rate in primary markets fell 70 basis points year-over-year, to 10.3%, despite 5% growth in inventory.

CBRE credited increased supply for the decline in national net absorption.

For more from the report, click here.