Dallas’ Data Center Rank Due to Midpoint in Long-Haul Fiber Networks

DALLAS—Cushman & Wakefield’s global data center market comparison recently evaluated 1,162 data centers across 38 global markets, with each data center scored across 12 weighted criteria. In consideration of each market, the highest weight was given to cloud availability, fiber connectivity and market size. Mid-weight considerations were development pipeline, government incentives, market vacancy, political stability and sustainability. Low-weight considerations included environmental risk, land prices, power costs and taxes.

For the top 10 markets–Northern Virginia, Silicon Valley, Dallas, Chicago, New York/New Jersey, Singapore, Amsterdam, Los Angeles, Seattle and London–global leaders maintain supremacy. At number three, Dallas impressively clocks in immediately after Silicon Valley.

“Dallas sits at the midpoint of several long-haul fiber networks and has long been a business-friendly location and infrastructure hub in the center of the country,” said Rick Hughes, executive managing director in Cushman & Wakefield’s Dallas office. “In addition, the state of Texas maintains strong data center incentives, with sales tax exemptions available on large builds over $200 million.”

This, combined with the relatively low cost of land, low risk of natural disasters and many locally based large enterprises has led to a consistently strong market, albeit one that has battled retail pricing compression, thanks to the pull power of large cloud services companies. More than 80MW is currently under construction throughout the market, with half of this included in a major expansion at the Infomart. Multiple large campuses remain in planning and absorption has remained consistently solid during the past two years.

“Current vacancy in DFW in the data center space is 14.2%. However, if you bifurcate the market, the vacancy is roughly 8% higher for those facilities in Collin and Denton counties, dropping the Dallas County vacancy to close to single digits,” Hughes tells GlobeSt.com.

The 10-megawatt data center that was impressive 10 years ago now pales in comparison to 30-megawatt leases now signed across the country with increasing regularity. Dallas has dipped a bit in that category, says Hughes.

“There are only three providers with 3MW or greater vacancy in Dallas and Tarrant county submarkets,” Hughes tells GlobeSt.com. “A couple of transactions could dramatically change that statistic. There was almost 30MW of absorption in 2019. Currently, there is 17.3MW under construction, so the market should look better as the year goes. Traditionally we have averaged around 40MW and I look for that trend to reappear in 2020. The pipeline is robust.”

Although the study’s top three markets had considerably higher scores than fourth place, the next 12 markets were separated by a final score of less than 10%. These are the emerging markets such as Atlanta, Denver, Dublin, Las Vegas, Phoenix, Portland, Salt Lake City, Sydney and Vancouver.

This close placement represents a new shift toward key secondary areas fast becoming primary markets around the globe. Moreover, large sites have sold recently in emerging US markets such as Portland, Phoenix and Atlanta, with these areas potentially offering significant savings over locating in California or Northern Virginia.

Additional markets in Asia-Pacific, especially Sydney, Tokyo, Hong Kong, Beijing and Shanghai, are expecting considerable growth in the next two to three years, with demand for greater connectivity and need for modernization of older assets required. The top 15 global markets will thus remain extremely competitive for the foreseeable future.

“The top markets provide the greatest number of options to the greatest number of perspectives,” said Kevin Imboden, director of research for Cushman & Wakefield’s data center advisory group. “While one size sometimes does fit all, for certain specializations it’s important to review and understand the factors most important to the specific requirement and aim accordingly. Combined with those markets that have been overlooked and underutilized, there is great potential for niche development and secondary markets across the globe.”