Data center boom shows no signs of slowing as vacancy hits record lows
A CBRE report indicates a significant 33% increase in data center inventory across top U.S. markets, yet vacancy has dropped to historic lows, reflecting insatiable demand from AI and cloud computing. Developers are in "catch-up mode," with 80% of under-construction space preleased years in advance, facing bottlenecks primarily from power availability and community resistance. Northern Virginia leads global data center growth, while Atlanta, Dallas-Fort Worth, and Chicago are also experiencing massive expansion.
Global data center inventory expanded by 25% year-over-year to 16 gigawatts in Q1, according to a new report from CBRE, the world's largest commercial real estate services firm. Despite this surge in supply, global data center vacancy fell from 8.3% to 6.7%. In key American hubs like Northern Virginia, Atlanta, Dallas-Fort Worth, and Chicago, vacancy rates are even lower, ranging from 0.3% to 2.2%, indicating intense demand.
Pat Lynch, Executive Managing Director for CBRE's Data Center Solutions, noted that developers are struggling to keep pace, with approximately 80% of data center space currently under construction in top U.S. markets already preleased for delivery in three to four years. Lynch stated that companies are rapidly securing future capacity, underscoring the "record inventory" being absorbed just as quickly as it's produced.
The demand is primarily fueled by advancements in artificial intelligence and cloud computing. However, growth is constrained by power availability, which Lynch identified as a significant bottleneck, and increasing community resistance. Lynch also suggested the industry needs to better promote the benefits of data centers to address public concerns.
Northern Virginia maintains its position as the global leader in data centers, with expansion now extending from Ashburn in Loudoun County to Maryland and Richmond. Other U.S. markets are also seeing substantial growth, including Atlanta, which is emerging as a potential alternative to Northern Virginia, and Dallas-Fort Worth, which has risen to become the nation's third-largest data center market. Chicago also replaced Phoenix in the top four, and Tennessee and West Texas are identified as emerging markets driven by available power.