Financial Services Firms Driving Insatiable Data Center Demand in 2022

Financial Services Firms Driving Insatiable Data Center Demand in 2022

Commercial News » New York City Edition | By Michael Gerrity | October 27, 2022 7:50 AM ET

According to CBRE's latest North America Data Center Trends Report, insatiable demand for data center space drove New York Tri-State's vacancy rate to an all-time low of 9.0% in H1 2022.

The financial services sector remained the dominant player in the market's leasing activity, which helped net absorption reach 16.0 MW in the first half of the year. To meet the robust demand, major data center operators are adding supply at a rapid pace, as under construction activity hit a 10-year high of 67 MW in H1 2022. 

"In addition to the never-ending demand by financial services companies, hyperscalers are also beginning to make waves in the region looking for capacity," said Robert Meyers, a Senior Vice President and part of CBRE's Data Center Solutions Group. "In the first half of the year, the vacancy rate dropped to just 9.0%, well below equilibrium. With 67 MW of new construction, we believe that the data center sector is well positioned to meet the growing demand, but more supply may be needed in the future. As of now, industrial developers have secured many of the prime sites for new development."

Notable activity in the New York Tri-State area included DataBank's new 30 MW facility under development in Orangeburg, NY; QTS's 9 MW data center under construction in East Windsor, NJ; and several facilities throughout the region being developed by Sabey, Digital Realty and CoreSite. 

National Trends

CBRE's latest North American Data Center Trends Report found that 352.9 megawatts (MW) of new supply went online in the seven primary U.S. data center markets* in the first half of 2022, a 20 percent increase year-over-year.

Despite the influx of additional capacity, data center vacancy decreased to an average of 3.8 percent across the seven primary markets in H1 2022--down from 10.3 percent in H1 2021--as large cloud users raced to secure space to accommodate anticipated future growth. Significant preleasing of space under construction in prior years also contributed to the large drop in vacancy. For the first time since 2017, tight market conditions caused average asking rents to increase in both primary markets (5.9 percent to $127.50 per kW) and secondary markets (2.3 percent to $133.00 per kW). Primary-market vacancy will remain tight for the foreseeable future, as 73 percent (1,170 MW) of the 1,601.5 MW of the under-construction supply was preleased as of the end of H1 2022.

Top U.S. Data Center Markets

Northern Virginia remained the most active data center market with net absorption of 269.3 MW--a 281 percent increase from H1 2021--and more than quadruple that of Silicon Valley, the next highest market. Net absorption totaled 453.4 MW across the seven primary markets in the first half of 2022, nearly triple that of the first half of 2021.

Northern Virginia (219.5 MW) accounted for 62 percent of new primary-market supply delivered in H1 2022. Other markets with notable supply growth in the first half of the year included Silicon Valley (56.0 MW), Phoenix (37.5 MW), Hillsboro, Ore. (30.0 MW), and Atlanta (20.0 MW).

CBRE reports the seven primary U.S. data center markets are Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix, New York Tri-State and Atlanta. 


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