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New Data Centers Can’t Be Built Fast Enough

Despite a huge increase in supply in the North American data center market in the first half of 2022, CBRE’s latest North American Data Center Report found that overall vacancy fell to a record low thanks to higher demand from major cloud service providers, social media businesses, and enterprise users. 

In the seven major markets for data centers, the percentage of new megawatts that went online increased by 20 percent from the previous year. As large cloud users rushed to secure space to handle expected future development, data center vacancy reduced to an average of 3.8 percent across the seven primary markets in the first six months of 2022, down from 10.3 percent in the first six months of 2021. The report also explained that tight market circumstances led to an increase in average asking rents in primary markets (a 5.9 percent increase totaling $127.50 per kW) and secondary markets (a 2.3 percent increase totaling $133.00 per kW) for the first time since 2017.

A lot of market growth can be attributed to rampant pre-leasing activity in the wake of pandemic-induced economic turbulence. A spike in pre-leasing activity resulted from worries that supply chain interruptions might limit capacity expansion, and large hyper-scalers have actively booked space to support anticipated growth over the next five years. So even as new data centers are going up, the market is expected to stay tight, at least for the foreseeable future.

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