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DATA CENTERS

2020 U.S. Real Estate Market Outlook
November 19, 2019
 

NEW PROVIDERS AND EXPANSIONS DRIVING NEW SUPPLY

The U.S. wholesale data center primary markets—Atlanta, Chicago, Dallas/Ft. Worth, New York Tri-State, Northern Virginia, Phoenix and Silicon Valley—accounted for more than 56% of the record annual absorption in 2018. Another record level of absorption is expected in 2019 as more than 120 MW of preleased capacity will deliver before the end of the year. New deliveries will increase these primary markets’ total data center inventory by 17.3% in 2019, increasing the competition among certain markets in 2020.

The large amount of new supply comes primarily from two sources: new providers bringing their first capacity online and expansions by existing providers. Competition between providers will continue to drive market pricing and contractual terms, creating aggressive leasing scenarios. End-users seek creative Hybrid IT environments through efficient right-sizing, enabling them to take advantage of both the new supply and government incentives.

FIGURE 17: PRIMARY MARKETS TOTAL INVENTORY & UNDER CONSTRUCTION

2020-Market-Outlook-Data-Centers-FIG17-01

Source: CBRE Research, CBRE Data Center Solutions, 2019.

FIGURE 18: H1 2019 PRIMARY MARKET % OF TOTAL UNDER CONSTRUCTION

2020-Market-Outlook-Data-Centers-FIG18-01

Source: CBRE Research, CBRE Data Center Solutions, Q2 2019.

ADVANCING TECHNOLOGIES GENERATE DEMAND FOR CONNECTIVITY-BASED DEPLOYMENTS

Enterprise users’ hybrid colocation strategies focused on multi-cloud access and density connectivity in 2019. We expect this trend to continue in 2020. Low latency solutions and flexibility remain a staple in the industry as they enable integration of current technologies to maximize performance. We expect providers will offer diverse options that enable an enterprise to establish a streamlined, secure and flexible environment in the market next year. In addition to agility and flexibility, end users are focusing on scalability and network access as they evaluate and integrate 5G and edge deployments into their portfolios. The integration of these new technologies is expected to create higher demand for more fiber access and power to support the resulting infrastructure. This trend may result in an uptick in demand in secondary/tertiary and legacy data centers nationwide.

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2020 U.S. Real Estate Market Outlook

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Contributors

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Richard Barkham, Ph.D.
Global Chief Economist & Head of Americas Research
+1 617 912 5215
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Spencer Levy
Chairman, Americas Research & Senior Economic Advisor
+1 617 9125236
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Michael Kane
Senior Research Analyst
Data Centers
+1 303 2641913