Northern Virginia Leads in Data Center Leasing Across US and Canada

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Northern Virginia was the top market for data center leasing in North America last year, with activity fueled by e-commerce, streaming, cloud migration, and government incentives, according to a new report from CBRE 

Northern Virginia saw 217.2 megawatts (MW) of net absorption in 2020, according to a report released March 11 detailing data center leasing. 

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The region ranked first in the U.S. in net absorption, followed by Dallas-Fort Worth (33.7 MW) and Silicon Valley (26.6 MW). 

“The record-setting absorption in Northern Virginia stems from the robust connectivity and fiber network in the region,” Josh Greenberg, a senior associate with CBRE, told Commercial Observer. “End-users, such as large technology companies and cloud providers, find significant value in locating their data centers in such an interconnected environment.”

Net absorption in North Virginia did fall about 15 percent from 2019 levels, driven by a significant amount of new supply; in 2020, 176.3 MW of inventory was added. Northern Virginia’s vacancy rate decreased by 4.2 percent year-over-year to 5.6 percent in 2020. 

CBRE’s report also noted there was 329.6 MW of net absorption last year across the seven primary U.S. data center markets. This number is down 11 percent from its peak in 2019, though the total absorption in 2020 was higher than any other year on record. Additionally, in those markets, vacancy decreased to 8.5 percent, despite an 11 percent growth in new supply. 

“With data usage growing at an explosive rate, we expect data center demand to increase across both primary and secondary markets in 2021,” Pat Lynch, CBRE’s senior managing director of data center solutions, said. “To capitalize on this growth, data center providers will look to deliver network and interconnection offerings to better connect business-critical applications, as well as to meet anticipated demand for evolving technologies like 5G, Edge computing and the internet of things — all of which will further fuel the data center real estate market.”  

The other top U.S. markets consist of Atlanta, Phoenix, Central Washington, Chicago and Seattle. Toronto and Montreal also made it into the top 10.  

Looking ahead, the NoVA data center market is primed to continue accelerating and remaining one of — if not the top — markets in the sector.

“We expect 2021 to be very active in Northern Virginia with over 250 MW expected to deliver in the market, of which over 70 percent is already spoken for,” Greenberg said. “We also anticipate the demand for additional data center space to remain strong as companies’ IT strategies evolve and new technologies emerge.”

The dominance of the market is not surprising, as the area has seen strong activity for some time, as CO reported last month. Currently, Northern Virginia accounts for 61 percent of the total construction pipeline for data centers in North America.