Data Centers Continue Market Resiliency

The data center market has remained resilient throughout the first half of 2020, due in large part to the critical role they play in business continuity.

CBRE Group recently issued a report finding that in the first half of the year the seven primary US data center markets registered 134.9 megawatts of neg absorption. Although this was down from record levels seen in the first half of 2018 and 2019, the numbers are still higher than the same periods in 2016 and 2017.

The Canadian data center market also had a strong first half of the year, with Toronto exceeding the absorption levels from the second half of 2019.

The report also noted that the vacancy rate in the primary US markets dropped 70 basis points year-over-year to 10.3 percent, even thought there was 5 percent growth in inventory during the fist half of the year.

The resiliency, the report said, is due to the fact that many businesses implemented hybrid IT infrastructure to improve their remote working capabilities. Streaming content providers also saw increased viewership due to the COVID-19 pandemic, the report said.

“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,” CBRE’s Pat Lynch, senior managing director of data center solutions, said in prepared remarks.

“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,” he added.

According to the report, the most active markets were were Northern Virginia, which had a 93.2 megawatt absorption; Toronto, which had a 35.7 megawatt absorption and Central Washington, which had an absorption of 13.9 megawats.