Activity from financial services companies drove data center leasing in the New York tri-state region in 2022, according to a new report from CBRE. The region recorded 18.1 megawatts of data center space leased in 2022, more than 70% increase compared to 2021.
“Concerns over the economy and rising interest rates have caused more firms than ever before to turn to the cloud, and not incur the added investment of owning and maintaining server equipment,” Jonathan Meisel, senior vice president with CBRE’s New Jersey’s offices, said. “In the New Jersey market specifically, health care and law firms have transitioned to more of a cloud-based and colocation model for their data needs.”
“With demand for data center space by the financial services sector dominating the activity, New Jersey’s vacancy rate for data centers dropped to an all-time low of 7.8% at the close of 2022,” William Hassan, senior vice president with CBRE’s New Jersey business, said.
According to the CBRE report, 105.4 MW of capacity is under construction, marking an unprecedented volume for the tri-state region. Notable activity in New Jersey includes the expected delivery of 9 MW of capacity in Piscataway in the next six months by QTS and CoreSite’s purchase of 215 County Ave. in Secaucus for $62.5 million.
“QTS is also demolishing a portion of their East Windsor campus with the goal of bringing on an additional 42 MW to that campus in 2024. That brings total under construction up to 147.4 MW. That’s closing in on the entire capacity of the market today,” Hassan added.
CBRE’s latest North American Data Center Trends Report found that tight market conditions and escalating energy and construction costs caused primary-market average asking rents to increase 14.5% year-over-year to $137.90 per kilowatt, the first year-over-year increase in pricing since 2017.
The seven primary U.S. data center markets — Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix, New York Tri-State and Atlanta — logged 686.9 MW of net absorption, up nearly 40% year-over-year. Despite a 17% increase in supply, vacancy fell to a record-low 3.2%. Two-thirds of the net absorption occurred in the first half of the year, as power and land constraints in certain markets, as well as construction delays, weighed on activity in H2 2022.