Demand remains strong for data centers, according to CBRE report

Cloud services providers’ increased demand has seen data center vacancy in the New York tri-state region, including New Jersey, drop to an all-time low, according to real estate firm CBRE.

CBRE said in a news release Monday that, in 2020, the region’s vacancy rate fell to 8.8%. The firm’s North American Data Center Trends Report also found that new construction will add 23.6 MW of capacity to the market — which had 149.1 MW at year-end.

“The tri-state market turnkey data center capacity is nearing historic lows, fueled by social media companies, as well as more traditional users like health care and financial services companies,” CBRE’s Jon Meisel said in a prepared statement. “The lack of supply is reaching dire levels in terms of accommodating ongoing expansions, not to mention attracting new users to our market.”

For 2020, the market saw 3.3. megawatts of net absorption, although that was down from nearly 9.0 MW in 2019, CBRE said.

“Many companies are reevaluating their digital requirements and have prioritized the importance of data centers,” CBRE’s William Hassan said in a statement. “In fact, a large NYC health care provider leased approximately 750 kilowatts in Piscataway, while a major social media company that committed to space earlier this year is now looking to expand.”

The report also found that, on the capital markets front, activity has remained consistent for both sale-leaseback and net-lease opportunities.

Nationally, the data center sector — one of the fastest-growing pre-COVID — remained strong in 2020. Net absorption came in at 329.6 MW across the seven major data center markets — in addition to the tri-state, they include Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix and Atlanta.

That was down 11% from the 2019 peak, but remained higher than any other year on record, CBRE said. Vacancy fell to 8.5%, despite an 11% growth in new supply.