Los Angeles – August 28, 2020 – Driven by demand from social media and cloud services companies, as well as new tax incentive legislation, Chicago saw the sixth-most data center leasing activity in North America in H1 2020, according to CBRE’s latest North American Data Center Trends Report.
Chicago saw 7.3 megawatts (MW) of net absorption in H1 2020, up approximately 55 percent from the same period a year earlier. Despite 20 MW of new capacity added since the end of H1 2019, the market’s vacancy rate dropped 40 basis points year-over-year to 13.7 percent. Chicago remains the fourth largest data center market in the U.S. by capacity.
“Activity has increased this year and we expect demand to remain strong for the foreseeable future,” said Jordan Thompson, vice president with CBRE’s Data Center Solutions Group in Chicago. “With its central location, infrastructure and access to a massive population, the Chicago market will continue to be a critical market for data center activity.”
National Trends
The North American data center sector was resilient in the first half of 2020 as many businesses implemented hybrid IT infrastructure to improve their remote work capabilities and streaming content providers saw increased viewership due to the COVID-19 pandemic.
The seven primary U.S. data center markets saw 134.9 megawatts (MW) of net absorption in H1 2020—down from record levels in the first halves of 2019 and 2018, but still higher than the same period in 2017 and 2016. The vacancy rate in the primary markets dropped 70 basis points year-over-year to 10.3 percent despite a 5 percent growth in inventory during H1. The decline in net absorption in H1 2020 was largely due to increased supply.
“The economic slowdown will force companies to scrutinize every dollar of their IT spending, but continued investment in mission-critical IT infrastructure like data centers and cloud services will be imperative to supporting business continuity and remote working,” said Pat Lynch, Senior Managing Director, Data Center Solutions, CBRE. “The outperformance of data center REITs compared to other public real estate securities so far in 2020 has brought new investor interest to the sector, which will likely result in increased development activity.”
Top North American Data Center Markets
Northern Virginia remained the most active data center market, with net absorption of 93.2 MW in H1 2020.
Top 10 Most-Active Markets:
Market H1 2020 Absorption Market H1 2020 Absorption
Northern Virginia 93.2 MW Silicon Valley 7.3 MW
Toronto 35.7 MW Chicago 7.3 MW
Central Washington 13.9 MW Phoenix 6.0 MW
Dallas-Fort Worth 12.2 MW Austin/San Antonio 6.0 MW
Atlanta 7.8 MW Montreal 5.5 MW
Strong demand over the past several years has resulted in a 373.6-MW data center construction pipeline in the primary markets, a third of which has been pre-leased. Northern Virginia accounts for 64 percent (239 MW) of the construction pipeline in the primary markets.
Other markets with significant construction pipelines include Montreal (55 MW), Central Washington (43.7 MW), Atlanta (28.5 MW) and Phoenix (28.1 MW).
*The seven primary U.S. data center markets are Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix, New York Tri-State and Atlanta.
Chicago saw 7.3 megawatts (MW) of net absorption in H1 2020, up approximately 55 percent from the same period a year earlier. Despite 20 MW of new capacity added since the end of H1 2019, the market’s vacancy rate dropped 40 basis points year-over-year to 13.7 percent. Chicago remains the fourth largest data center market in the U.S. by capacity.
“Activity has increased this year and we expect demand to remain strong for the foreseeable future,” said Jordan Thompson, vice president with CBRE’s Data Center Solutions Group in Chicago. “With its central location, infrastructure and access to a massive population, the Chicago market will continue to be a critical market for data center activity.”
National Trends
The North American data center sector was resilient in the first half of 2020 as many businesses implemented hybrid IT infrastructure to improve their remote work capabilities and streaming content providers saw increased viewership due to the COVID-19 pandemic.
The seven primary U.S. data center markets saw 134.9 megawatts (MW) of net absorption in H1 2020—down from record levels in the first halves of 2019 and 2018, but still higher than the same period in 2017 and 2016. The vacancy rate in the primary markets dropped 70 basis points year-over-year to 10.3 percent despite a 5 percent growth in inventory during H1. The decline in net absorption in H1 2020 was largely due to increased supply.
“The economic slowdown will force companies to scrutinize every dollar of their IT spending, but continued investment in mission-critical IT infrastructure like data centers and cloud services will be imperative to supporting business continuity and remote working,” said Pat Lynch, Senior Managing Director, Data Center Solutions, CBRE. “The outperformance of data center REITs compared to other public real estate securities so far in 2020 has brought new investor interest to the sector, which will likely result in increased development activity.”
Top North American Data Center Markets
Northern Virginia remained the most active data center market, with net absorption of 93.2 MW in H1 2020.
Top 10 Most-Active Markets:
Market H1 2020 Absorption Market H1 2020 Absorption
Northern Virginia 93.2 MW Silicon Valley 7.3 MW
Toronto 35.7 MW Chicago 7.3 MW
Central Washington 13.9 MW Phoenix 6.0 MW
Dallas-Fort Worth 12.2 MW Austin/San Antonio 6.0 MW
Atlanta 7.8 MW Montreal 5.5 MW
Strong demand over the past several years has resulted in a 373.6-MW data center construction pipeline in the primary markets, a third of which has been pre-leased. Northern Virginia accounts for 64 percent (239 MW) of the construction pipeline in the primary markets.
Other markets with significant construction pipelines include Montreal (55 MW), Central Washington (43.7 MW), Atlanta (28.5 MW) and Phoenix (28.1 MW).
*The seven primary U.S. data center markets are Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix, New York Tri-State and Atlanta.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
