CBRE report: Financial services dominates data center leasing

The financial services sector dominated data center leasing activity in the tri-state region during the first half of 2021, according to the CBRE North American Data Center Trades report released earlier this month.

According to the report, the market experienced increased activity from cloud service providers over the past three months and the region saw 6 megawatts of net absorption in the first half of 2021, up from the 3 MW recorded during all of 2020.

New construction underway by operators such as Coresite, CyrusOne, Sabey and QTS will add 38.1 MW of capacity to the market’s total inventory, which now stands at 160.6 MW.

The vacancy rate in the region fell to 12.1%

CBRE Senior Vice President Jon Meisel said the market is worth watching.

“The price of data center power per kilowatt has remained stable in the tri-state region, mostly due to the historic cost-of-build compression and ingrained build efficiencies,” he said. “However, the market should keep a close eye on whether new supply will affect pricing in the future.”

Senior Vice President William Hassan noted that almost all the recent leasing activity was in the form of existing data center tenants expanding.

“We have new providers entering the market, hyperscale firms circling and spec construction of white space for the first time in almost a decade — all signs of just how strong the data centers market is in the region,” he said.

Development activity analyzed in the CBRE report included Digital Realty’s delivery of the first two facilities on its 600,000-square-foot campus in Totowa, as well as the completion of two East Coast data centers by a major global bank.

North American data centers also saw a growth in construction and net absorption in this year’s first half, as cloud service providers and social media companies drove demand, according to CBRE.

Northern Virginia remained the most active data center market with net absorption of 70.6 MW in H1 2021 — more than triple that of Phoenix, the next highest market.