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Surging demand from large cloud users driving record absorption
U.S. DATA CENTER TRENDS REPORT H1 2018
CBRE Research` © 2018 CBRE, Inc. | 2
U.S. DATA CENTER TRENDS REPORT H1 2018
Contents
03 MarketFundamentals
07 CapitalInvestment
09 ThingstoWatch
11 PrimaryMarkets
14 SecondaryMarkets
16 Appendix
Executive SummaryDemandfromhyperscalecloudusersledtomorethan177megawatts(MW)ofnetabsorptioninthefirsthalfof2018.
Withnearlytwo-thirdsofthe2017netabsorption(anannualrecord)alreadyrecordedinH12018,themarketisonpaceforanotherrecordyear.
Stronginvestorinterestinthedatacentersectorcontinued,withmorethan$7billionofinvestmentinH12018,47%ofwhichwasinasset-leveltransactions.
DevelopmentpipelinesinlargeprimarymarketslikeNorthernVirginiaandSiliconValleyarerapidlybeingpreleasedtomeetthespeed-to-marketrequirementsofoccupiers.
NationalpricingtrendsdidnotkeeppacewithstrongmarketfundamentalsinH1,ascloudusersdemandedlowerpricesforthelargewholesalecolocationcapacitytransactionstheyrequire.
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TheNorthAmericanwholesaledatacentermarketcontinueditssubstantialgrowthofrecentyearsinH12018.Despitethedeliveryofnewsupply,positivenetabsorptionresultedfromstrongdemandfromhyperscalecloudusersfordeploymentsofteninexcessof3MW.InNorthernVirginia—theworld’slargestdatacentermarket—65%ofnetabsorptioncamefromhyperscalecloudusers.ThesevenprimaryU.S.datacentermarkets—Atlanta,Chicago,Dallas/Ft.Worth,NewYorkTri-State,NorthernVirginia,PhoenixandSiliconValley—recordedmorethan177MWofpositivenetabsorptioninH1.Withnearlytwo-thirdsoftheannualrecordabsorptiontotalin2017alreadyrecordedinH12018,themarketisonpaceforanotherrecordyear.
Market Fundamentals
*Vacancy Y-o-Y changes are calculated by comparing the difference between H1 2017 and H1 2018.**Rental rates are quoted asking rates for 250+ kW at N+1/Tier III requirements. Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
Market InventoryY-o-Y
ChangeAvailable MW/ Vacancy Rate
Y-o-Y Change*
Net Absorption
Rental Rates (kW/mo)**
Northern Virginia 805.8 MW p 198.0 MW 53.3 MW / 6.6% p 80 bps 100.0 MW $120-$140
Phoenix 212.9 MW p 46.0 MW 25.8 MW / 12.1% p 320 bps 32.5 MW $120-$135
Dallas/Ft. Worth 267.8 MW p 33.4 MW 51.3 MW / 19.2% p 40 bps 19.1 MW $120-$140
Silicon Valley 234.6 MW p 40.0 MW 11.4 MW / 4.9% q 50 bps 10.6 MW $150-$170
Chicago 245.0 MW p 56.6 MW 27.6 MW / 11.2% p 870 bps 9.4 MW $130-$145
Atlanta 131.0 MW p 6.0 MW 19.2 MW / 14.7% u 0 bps 3.0 MW $120-$135
New York Tri-State 157.3 MW p 2.1 MW 22.4 MW / 14.2% q 400 bps 2.5 MW $130-$150
Figure 1: Primary Market Fundamentals
Figure 2: H1 2018 Wholesale Secondary Market Fundamentals
*Vacancy Y-o-Y changes are calculated by comparing the difference between H1 2017 and H1 2018.**Rental rates are quoted asking rates for 250+ kW at N+1/Tier III requirements. Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
Market InventoryY-o-Y
ChangeAvailable MW/ Vacancy Rate
Y-o-Y Change*
Net Absorption
Rental Rates (kW/mo)**
Austin/San Antonio 124.1 MW p 9.0 MW 10.1 MW / 8.1% q 130 bps 9.8 MW $140- $155
Seattle 95.5 MW p 2.0 MW 12.8 MW / 13.4% q 470 bps 6.1 MW $125-$150
Southern California 104.4 MW p 16.0 MW 19.6 MW / 18.8% p 250 bps 5.2 MW $130-$160
Denver 92.6 MW p 4.4 MW 21.7 MW / 23.4% p 70 bps 1.8 MW $130-$150
Houston 97.1 MW p 0.4 MW 22.0 MW / 22.7% q 230 bps 1.1 MW $140-$165
Charlotte/Raleigh 55.6 MW p 4.7 MW 14.1 MW / 25.3% p 300 bps -2.9 MW $130- $145
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Demandintheprimarymarketswasalsofueledbyenterprisedeploymentsrangingfrom250KWto500KW.LargerexpansionsandanincreaseinsmallerwholesaledeploymentsledtoactivityabovehistoricalaveragesinsecondarymarketssuchasAustin/SanAntonio,HoustonandSeattle.
Strongdemandfromdatacenterprovidersresultedinmorethan474MWofcapacityunderdevelopmentwithinU.S.primarymarketsinH1,nearly55%ofwhichispreleased.AlargeportionofthispreleasingactivitywasbyhyperscalecloudusersinNorthernVirginia.
Similartohyperscaleusers,enterpriseend-users’needforrapiddeploymentsremainedacrucialfactorforsite-selectiondecisions,withafocusonreadilyavailableturnkeydatacenterspace.Furthermore,manyenterpriseendusers’businessstrategiesinvolvedstrategicinfrastructuredeploymentsandconsolidationoftheirowned-portfolios.InsecondarymarketslikeSeattle,theincreaseddemandstemmingfromexpansionsandnewentrantsledtoannouncementsoffuturedevelopmentprojects.
Figure 3: Inventory Growth of Primary Data Center Markets Since 2015% Growth
*Tri-State Region; Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
0%
50%
100%
150%
Dallas/Ft. Worth Northern Virginia Chicago Silicon Valley Phoenix Atlanta New York*
Figure 4: Primary Markets - Net Absorption & Pre-Leasing
Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
Net Absorption (MW) Pre-leased (MW)Megawatts
0
50
100
150
200
250
300
2016 2017 H1 2018
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100.0
32.5 19.1 10.6 9.4 3.0 2.5
297.2
61.4 45.6 29.5
3.1 21.0 16.5
0
50
100
150
200
250
300
350
Northern VA Phoenix Dallas/Ft. Worth Silicon Valley Chicago Atlanta New York*
Figure 5: Net Absorption vs. Under Construction by Primary Market
*Tri-State; Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
H1 2018 Net Absorption (MW) H1 2018 Under Construction (MW)Megawatts
Figure 6: Net Absorption vs. Under Construction by Secondary MarketH1 2018 Net Absorption (MW) H1 2018 Under Construction (MW)Megawatts
Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
8.0
2.5 3.2
11.6
0.0 1.0
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2
4
6
8
10
12
14
Austin/ San Antonio Seattle Southern California Denver Houston Charlotte/Raleigh Austin/San Antonio
Regardlessoftheusertype,vacancyratesforcommissioneddatacenterspaceinmostmarketsslightlyincreased,asdeveloperscontinuedtodeliverlargeblocksofcapacity.Forthefirsttime,theSiliconValleyvacancyratefellbelow5%,asfirst-generationavailablecapacityremainedscarce.Thesetightmarketconditionshaveforcedoccupierstoexpandintootherprimaryandsecondarymarkets.
9.8
6.1 5.2
1.8 1.1
-2.9
8.0
2.5 3.2
11.6
0.0 1.0
-6
-4
-2
0
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10
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Figure 7: Construction Pipeline by Primary Market – Available & Pre-Leased Supply Under Construction
*Tri-State; Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
H1 2018 Pre-Leased H1 2018 U/C AvailableMegawatts
Phoenix,withrecordlevelsofconstruction,isarecipientofthisexpansionbaseddemand.Landtransactionscompletedafewquartersagohaveledtonewprovidersandexpansionswithinthemarket.Tomatchthedemand,morethan60MWarecurrentlyunderconstructioninPhoenix,withmorethan120MWannouncedforfuturebuildout.
0
50
100
150
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250
300
350
Northern Virginia Phoenix Dallas/Ft. Worth Silicon Valley Atlanta New York* Chicago
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NorthAmericandatacenterinvestmentvolumereached$7billioninH1,inclusiveofsingle-asset,portfolioandentity-leveltransactions.Thislevelofinvestmentisonlyatnearly35%of2017’srecord-settingtotalvolumedrivenbylargeentity-leveltransactions.InvestmentvolumeinH1wasbalancedbetweentransactiontypes,asopposedto2017’sentity-levelheavyvolume.Thefor-saleinventoryiscompetitiveandincludesreadilyavailablecorporateassetstradingforcapitalizationratesrangingfrom5.5%to7.5%forstabilizedassets.
The three largest transactions in H1 2018 were:
1. GTTCommunications’acquisitionofInterouteandits15datacenters,17virtualdatacentersand51colocationfacilitiesfor$2.3billion.TheacquisitionprovidesasignificantincreaseinGTT’sfibernetworkfootprint.
2. IronMountain’sacquisitionofIODataCentersfor$1.3billion.ThetransactionincludedthelandandbuildingsoffourdatacentersintheU.S.andwilladdmorethan700,000sq.ft.ofcapacitytoIronMountain’sportfolio.
3. Equinix’sacquisitionoftheInfomartDataCenterfacilityinDallasfor$800million.Thiswasthelargestsingle-assettransactioninH12018.InfomartisasignificantinterconnectionhubintheU.SandprovidesEquinixwithadditionalcapacityfortheirofferings.
Singleandportfolioasset-levelsalescontinuedtogarneralargershareoftotalNorthAmericaninvestmentvolume,accountingfor48%ofthetotalinH1comparedto27%oftotalvolumeinallof2017.Significantasset-leveltransactionsincluded:
• Mapletree’sacquisitionof14datacentersfromCarterValidusfor$750million.Theportfolioisfocusedonlongerleaseswithestablishedtenants,spansninestatesandaddsmorethan2.0millionsq.ft.toMapletree’smanagement.
Capital InvestmentFigure 8: North American Investment
Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
$ Millions
0
5,000
10,000
15,000
20,000
25,000
2011
2012
2013
2014
2015
2016
2017
H1 20
18
Figure 9: North American Investment
Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
Asset Entity$ Millions
0
5,000
10,000
15,000
20,000
25,000
2017 H1 2018
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Transaction Type Buyer Seller Sale Price (M)* Buyer Type Location
Entity GTT Communications Interoute $2,300.0 Occupier/Operator North America
Entity Iron Mountain IO Data Centers $1,315.0 Occupier/Operator North America
Asset Equinix (REIT) ASB Real Estate, DCI Technology Holdings $800.0 Occupier/Operator North America
Entity Equinix (REIT) Ontario Teachers' $792.0 Occupier/Operator APAC
Asset Mapletree Carter Validus $750.0 Investment North America
Asset IPI Data Center Partners Management ASB Real Estate Undisclosed Occupier/Operator North America
Asset Ensono Wipro $405.0 Occupier/Operator North America
Asset Keppel DC REIT Kingsland Development, Nylect Holdings $295.0 Occupier/Operator APAC
Asset Iron Mountain Evoswitch $235.0 Occupier/Operator EMEA
Entity InfraVia Green Data Centers $217.0 Occupier/Operator EMEA
Asset NextDC APDC $212.0 Occupier/Operator APAC
Managed Services Internap SingleHop $132.0 Occupier/Operator North America
Asset CBRE Global Investors Duke Realty $109.9 Occupier/Operator North America
*MillionsNote: includes closed deals over $100 million. Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
Figure 10: H1 2018 Largest Global Transactions
• Ensono’sacquisitionofWipro’shosteddatacenterbusinessfor$405million,whichincludeseightdatacentersandmorethan900employees.
ManagedservicescontinuedtotradeinH1.Forexample,InternapboughtSingleHopfor$132milliontostrengthenitsmanagedhostingandprivatecloudofferings.Futuremanaged-serviceconsolidationsareexpectedascompaniesseekadditionalstrategicacquisitionstobolstertheproductstheycanprovidetotheircustomers.
While2018investmentvolumemaynotexceedtherecordvolumeof2017,theinvestmentmarketisexpectedtoproducestrongresultsdrivenbythefollowing:
• Sale-leaseback/partial-leasebackfromenterpriseusers.
• Hyperscaleuserslookingfordevelopmentpartnersandcreativewaystodeliverlow-costturnkeycapacity.
• Continuedinfluxofnewinvestorsinthedatacenterspace.
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Things to Watch
• Howwilltheappetiteforturnkeydatacenterspacecontinuewithtechnologicaladvances,including“bigdata,”edgecomputing,5GandtheInternetofThings(IoT)?
• Willhyperscalecloudactivityleadtoanotheryearofrecord-breakingabsorption?
• Willrelativelyhighlevelsofpreleasingleadtomorespeculativedevelopment?
• Willproviderscontinuetodeliversupplyinmarketstomatchdemandorwillactivecapacityrequirementsseeknewmarketopportunities?
• Whatwillbetheimpactofnewprovidersonmarketdynamics?
• WillthevolumeofenterprisedatacentersalesincreaseasmorecompaniesadoptaHybridITdeploymentstrategy?
• Willtherebeadditionalproviderconsolidationthroughmergersandacquisitions,whichhavehistoricallyaccountedformuchoftheannualinvestmentvolume?
• Areinvestorsstillattractedtofor-saleassetsthatneedupgrading?
TheEvolutionofDemand
CapitalInvestment
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U.S. DATA CENTER TRENDS REPORT H1 2018
Market Profile
Denver
Mature/Primary Emerging/SecondaryDeveloping/Tertiary
High
Moderate
Low Charlotte/Raleigh
Northern Virginia
Atlanta
Seattle
Phoenix
Chicago
Dallas/Fort Worth
Silicon Valley
Southern California
Austin/San Antonio
New York Tri-State
Houston
RECOVERY CONTRACTION
EXPANSION BALANCED/ GROWTH LA
ND
LORD
FA
VORA
BLE
TEN
AN
T FA
VORA
BLE
VACANCY UNDER SUPPLY RENT
VACANCY OVER SUPPLY RENT
MARKET EQUILIBRIUM
Chicago
Northern Virginia
Phoenix
Silicon Valley
Southern New York Tri-State
Dallas/Ft. Worth
Atlanta
Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
Market Growth
Figure 11: Data Center Market Cycle: Primary U.S. Markets
Source: CBRE Research, CBRE Data Center Solutions, H1 2018.
Figure 12: Data Center Market Maturity
*The Data Center Market Cycle Graph reflects the current wholesale market conditions, taking into consideration the following variables:
• Demand (leasing, absorption, requirements in the market)
• Supply (existing vacancy, future availabilities, construction pipeline)
• Rental rate trend
Distance from the horizontal market equilibrium line generally implies the relative strength and/or weakness of a market relative to each other and their historical trends. Arrows indicate most recent trend.
Categories typically represent the following conditions:
Expansion: landlord/provider-favorable conditions; under-supplied market, strong demand, declining vacancy and upward pressure on pricing
Balanced/Growth: landlord/provider-favorable conditions; new supply more evenly balanced, stable or slightly increasing vacancy, rent growth slowing or flat
Contraction: tenant-favorable conditions; over-supplied market, increasing vacancy, weak demand, downward pressure on pricing
Recovery: tenant-favorable conditions; stable or slightly declining vacancy, moderate but improved demand, rent growth flat or increasing
Demand: A Tale of Two Segments
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Primary Market Insights
Atlanta’sdatacentermarketispositionedforgrowth,withanall-time-record21MWcurrentlyunderdevelopment.ExpansionsbySwitch,CyrusOne,zColo,T5andDatabankwillbringnewcapacitytothemarketinthecomingquarters.Morethan$5billionoffutureinvestmenthasbeenannouncedbymulti-tenantdatacenterprovidersandhyperscalecloudproviders.ThisincludesT5’s$100millionATLIIAtlantafacility.
Overall,thelimitedlargeblocksofavailabilityledtothecompletionofsmallertransactionsinthefirsthalfof2018.Upondeliveryofcapacityinthenextsixto18months,hyperscaleandenterpriseuserswith
activerequirementswillhavemoreoptionstofindavailabilityforadditionaldeployments.
Manyfactors,includingnationallycompetitiveincentives,cost-effectivelandandrelativelylowoperatingcosts,willcontinuetogrowdemandintheAtlantamarket.Noteworthychangestotax-incentivepolicyoccurredin2018,asthestateofGeorgiarolledoutnewlegislationtoaidinattractingdatacenterdevelopmentsofmorethan$250millionthroughreducedsalestaxondatacenterequipment.ThisspecificlegislativechangeisdesignedtohelpAtlantacompetefordatacenterbusinessbothregionallyandnationally.
Atlanta Net Absorption* 65.6%
Vacancy Rate* 14.7%
DeliveryofnewsupplyinChicagowelloutplaceddemandinH12018,asthevacancyrateincreasedbynearly9percentagepointsfromayearago.Forthefirsttimeinmultiplequarters,themarketfeaturedseveralimmediatelyavailablelarge,contiguousblocksofcommissionedcapacity.Whilethenewsupplyhasyettobeabsorbed,interestisnotlacking.Theinteresthasledtonew
providersenteringorplanningtoenterthemarket(RagingWire,Stream,CoreSiteandCloudHQ)andexpansionsbyexistingproviders(ServerFarmandT5).AsofQ22018,morethan140MWofnewcapacityisplannedinChicago.Allthingsconsidered,Chicagoremainsgeographicallyanddemographicallywell-positionedtocapturefuturedemandfrombothenterpriseandhyperscaleusers.
Chicago Net Absorption* 123.8%
Vacancy Rate* 11.2%
*Arrows indicate change from H1 2017 to H1 2018.
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U.S. DATA CENTER TRENDS REPORT H1 2018
Dallas/Ft.Worthbegan2018withstrongleasingactivityfromtheenterprisesector,withapproximately25%comingfromnationalhyperscaleuserstaking1MWto4MWblocks.TheabsorptionwasdiversifiedacrossCyrusOne,Aligned,QTS,DigitalRealty,DataBankandRagingWirefacilities.ProvidersincludingDigitalRealtyandQTSaddedsupplytotalingmorethan20MWinH1tocapturesomeofthehighestdemandforwholesalecapacityinthecountry.
Dallashasbecomeoneofthefewdatacentermarketsintheworldtoprovidenumerouscontiguousavailabilitiesandoptionsforfutureon-siteexpansions.Thus,itiswell-positionedfor
largerhyperscaledeploymentscomparedtomanyothernationalmarketsthathavesub-8%vacancyrates.RecentlycompleteddevelopmentsincludeDataBank’sPlanocampusandCyrusOne’sAllencampus.NewdevelopmentsfromStream,QTSandEdgeCorewillbreakgroundthisyear.
Equinix’s$800millionacquisitionoftheInfomartDataCenterfacilityfromDCITechnologyHoldingsandASBRealEstatemarkedthelargestNorthAmericansingle-assetdatacentertransactioninH12018.Thepropertytradedfornearly$500persq.ft.andprovidesEquinixwithinterconnectionaccessunlikeanyproviderintheregion.
Dallas/Ft.Worth Net Absorption* 42.8%
Vacancy Rate* 19.2%
TheNewYorkTri-StatedatacentermarketremainedsteadyinH12018.Positivemomentumfromleasingactivitybroughtconstructionactivityto16.5MW,ledbyIronMountain,DigitalRealtyandQTS.Morethan23%ofthisunder-constructioncapacityispreleased—thehighestlevelofpreleasinginthreeyears.Additionalabsorptionshouldcomefromexistingrequirementsforin-marketexpansions,primarilyfromfinancialandhealth-carecompanies.
Traditionallydrivenbyretailcolocationactivity,theNewYorkTri-StatemarketcapturedbothsmallerwholesaleandretaildeploymentsinH1.Amideconomicandfinancialconstraints,providerscontinuetodiversifyofferingstoattractprimarilyretailwithsmallerwholesalecolocationdeployments.
NewYorkTri-State Net Absorption* 16.7%
Vacancy Rate* 14.2%
TheNorthernVirginiadatacentermarkethadthestrongeststartofanyU.Sdatacentermarketwithnetabsorptionof100MW.MoreabsorptionoccurredinNorthernVirginiainH1thaninalltheotherprimarymarketscombined.Despiteseveralnewlarge-scaledeliveries,therecorddemandhasresultedinlimitedlargeblocksofavailabilityandkeptthevacancyratetoatight6.6%.Newprojectstotaling297MWincapacityfromprovidersincludingCloudHQ,CyrusOne,DigitalRealty,VantageDataCenters,SentinelDataCenters,Sabey
DataCentersandQTSarealready79%preleased.Projectswithanother280MWofcapacityareplannedforthesecondhalfoftheyear.
Colocationdemandisforcinglocalgovernmentstocarefullyconsiderlegislationthatcouldaffectnewconstructionandgrowth.InPrinceWilliamCounty,theboardofsupervisorsrejectedlegislationthatwouldhaveraisedthetaxratefordatacenterequipment.
NorthernVirginia Net Absorption* 141%
Vacancy Rate* 6.6%
*Arrows indicate change from H1 2017 to H1 2018.
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U.S. DATA CENTER TRENDS REPORT H1 2018
Phoenixrecorded32.5MWofpositivenetabsorptioninH1,makingitoneofthemostactivedatacentermarketsinthecountry.Wholesaleprovidersexpandedacrossthemarket,addingmorethan46MWofnewsupply.Withtheseadditions,thewholesalevacancyraterose320bpsto12.1%.Constructionactivitytotalledmorethan60MWofcapacity—thesecond-largestamountofallprimarymarkets.ExpansionsandnewfacilitiesareunderwaybyproviderssuchasCyrusOne,AlignedDataCenters,IronMountainandEdgeCore.
Withagrowingconstructionpipeline,Phoenixhasthepotentialforfuturegrowth.Therearenumerousmulti-megawattrequirementsduetoPhoenix’sstatusasanattractivemarketforWestCoastandnationalexpansion.Strongincentiveprogramsandloweroperatingcostsshouldcontinuetoattracthyperscaleandenterpriseusers.
Phoenix Net Absorption* 802.8%
Vacancy Rate*12.1%
SiliconValleyremainedthemostsupply-constrainedmarketintheU.S.,withasub-5%vacancyrateforthefirsttimesinceCBREbegantrackingthedatacenterindustryin2013.Thevacancyratehasdropped50bpssincethebeginningof2017,asfirst-generationwholesalecapacityisinextremedemand.NetabsorptioninH12018primarilyoccurredinCoreSite’snewSV7facilityduetolimitedavailabilityinotherfacilities.Someproviders,includingEquinix,areattemptingtocapturewholesalecapacityinthemarket,astheyhavecommitmentsfrommultipletechnology-focusedcompanies.
Newsupplytotaling29.5MWincapacityiscurrentlyunderwaybydevelopers,includingVantageDataCenters,CoreSiteandDigitalRealty.Additionalsupplyisexpectedfromnewentrantstothemarket,includingRagingWire.Demandhasledtopreleasinglevelsof45.1%ofnewcapacity.Wholesaledemandisexpectedtomatchpreviousyears’levels,asnewcapacitycomesonlineoverthenextsixto18months.
SiliconValley Net Absorption* 67.9%
Vacancy Rate* 4.9%
*Arrows indicate change from H1 2017 to H1 2018.
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U.S. DATA CENTER TRENDS REPORT H1 2018
Secondary Market Insights
• Demandremainsstable,withactivityprimarilyinDataFoundry,CyrusOneandDigitalRealtyfacilities.
• ConstructionactivityisprimarilybyDigitalRealtyandDataFoundry.
• Enterpriseusershaveaccountedformuchof2018’sleasingactivity.Mostdealsareretailcolocation,withlargerdealsaveraging250KW.
• Muchofthemarketdemandisfromlargehyperscaleusersofferingamixtureofinternetcloudexchanges.
Austin/SanAntonio Net Absorption* 68.8%
Vacancy Rate* 8.1%
• Fundamentalshaveflattenedoverthepastfewquarters.Providersinthisemergingmarketareablendofsingle-tenantdatacentersandsmallerretailandwholesalecolocationfacilities.
• Activityisfromsmallerdeployments,average250KW,focusedongeographicaccess.
• Enterpriseusersareprimarilyinthefinancialandtechnologyindustries.
• TierpointandFlexentialwerethemostactiveprovidersinH12018.
• Whilethecurrentvacancyrateseemselevated,itrepresentsonly14.1MWofavailablecapacity.
• TheCharlotte-Raleighmarketisamongthefewinthenationwithcost-effectivelandavailableforadditionaldevelopment,aswellaslow-costpower.Thiscombinationbodeswellforfuturedemand.
Charlotte/Raleigh Net Absorption* 221.2%
Vacancy Rate* 25.3%
• H1absorptionlevelsmatchedhistoricalannualaverages,asprimarilyretailcolocationdealswerecompleted.
• Wholesaleoccupiersprimarilycamefromthehealth-careandtechnologyindustries.
• Constructionactivitytotallednearly12MW,withprojectsunderwaybyEdgeConnex,CoreSite,FlexentialandZayo.PlannedannouncementsincludeonefromIronMountain.
Denver Net Absorption* 55%
Vacancy Rate*23.4%
*Arrows indicate change from H1 2017 to H1 2018.
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*Arrows indicate change from H1 2017 to H1 2018.
• AbsorptioninH12018wasmorethandoublethatofanyprevioushalfyear.
• Requirementsgreaterthan500KWcameprimarilyfromexpansionsbyhyperscalecloudprovidersandglobaltechnologycompanies.
• DigitalRealtyandSabeyDataCentershave2.5MWofcapacityunderconstruction.
Seattle Net Absorption* 177.3%
Vacancy Rate* 13.4%
• CoreSiterenewedits160,000-sq.-ft.leaseatOneWilshireandaddedanother17,000sq.ft.TherenewalextendedoptionsatCoresite’sLA1facilitythrough2044.
• CoreSitecommencedconstructionofa28,000sq.ft.turnkeydatacenteratLA2,whichis100%preleased.LA2nowisnearcapacity,andthecompanyhasplansforanLA3developmentthatwilldeliver18MWofcapacityin2019.
• Leasingactivityinthemarketwasprimarilyledbytechnology,entertainmentandhealth-carecompanies.
SouthernCalifornia Net Absorption* 173.7%
Vacancy Rate* 18.8%
• Houstonhadarelativelyslowstarttotheyear,asnewdevelopmentstalled.
• Primarilydependentontheoil&gassector,Houstonhasnewdemandfromhealth-care,transportationandcryptocurrencyoccupiers.
• CyrusOneremainsthelargestdatacenterproviderinthemarketwithmorethan48%oftheexistinginventory.
• DataFoundrycurrentlyhasalargeblockofavailablecapacity.
Houston Net Absorption* 257.1%
Vacancy Rate* 22.7%
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H1 2018U.S. DATA CENTER TRENDS APPENDIX
Figure 13: Market Definitions
Term Definition
Powered Shells Purpose built or hardened shell; Power and Fiber to site; no equipment included.
Hyperscale Cloud Service Provider Multi-megawatt user, typically 5+ MW and larger.
Wholesale Colocation Building shell & infrastructure to PDU providing space, power & cooling; Generally in demised suites above 250 KW.
Retail Colocation Building shell & infrastructure in shared environment, space generally divided by racks or cages; may include IT hardware as well as a menu of services.
Hybrid IT A combination of cloud services, third-party colocation and owned, on-premise infrastructures.
Enterprise Data Centers Hardened data centers; houses "mission critical" operations of individual companies.
Data Center Net Absorption Net change in existing/commissioned wholesale power capacity.
Data Center Power Measured in kilowatts (kW) and megawatts (MW).
Appendix
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Pat Lynch Senior Managing Director Data Center Solutions [email protected]
Michael Kane Senior Research Analyst Data Center Solutions [email protected]
Spencer G. LevyHead of Research and Senior Economic Advisor, [email protected]:@SpencerGLevy
TolearnmoreaboutCBREResearch,ortoaccessadditionalresearchreports,pleasevisittheGlobalResearchGatewayatwww.cbre.com/researchgateway.
AdditionalU.S.ResearchfromCBREcanbefoundhere.
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U.S. DATA CENTER TRENDS REPORT H1 2018