Demand for data centers in North America continues to grow, prompting an increase in supply of under-construction centers by 70 percent to a record high of 3,871.8 megawatts during the first half of 2024. However, a shortage of available power and longer lead times for electrical infrastructure continued to delay construction.
The latest report from CBRE Group reveals that data center supply in North America’s primary markets increased by 10 percent or 515.0 megawatts in H1 2024 and by 24 percent or 1,100.5 megawatts year-over-year.
The overall vacancy rate for primary markets fell to a record-low 2.8 percent in H1 2024 from 3.3 percent a year earlier, while the overall vacancy rate for secondary markets fell to 9.7 percent from 12.7 percent over the past year.
The report also revealed that almost 80 percent or 3,056.4 MW of the 3,871.8 MW under construction in primary markets was pre-leased. While cloud providers continued to lease most available power capacity, artificial intelligence (AI) providers also accounted for a considerable amount of market demand.
Asking prices rise
North America continued to see an increase in data center pricing during the first half of the year albeit at a slower rate than last year. The average monthly asking rate for a 250- to 500-kilowatt requirement across primary markets increased by 7 percent in H1 2024 to $174.06 per kW/month. Fueled by limited supply and strong demand, the average asking price across primary wholesale colocation markets for a 250- to 500-kW requirement increased by 6.5 percent in H1 2024 to $174.06 per kW/month.
Atlanta led all primary markets with a 26 percent year-over-year increase in pricing, largely due to strong demand from AI providers.
“Increased demand for high-power computing is creating a significant price disparity between new data centers and legacy facilities. Many existing data centers lack the infrastructure to handle these demanding workloads, further limiting their appeal,” added the report.
Investment activity surges
During the first half of 2024, North America saw significant investments in data centers as tech giants tried to keep pace with the rising demand. AWS closed on the first phase of its $650 million acquisition of Talen Energy’s nuclear-powered data center campus in Pennsylvania. Meanwhile, PGIM and Equinix announced their $600 million joint venture development of a new Silicon Valley data center.
In addition, Digital Realty made notable transactions including the first phase of a $7 billion joint venture with Blackstone for campuses in Paris, France, and Northern Virginia. The joint venture also will include the development of hyperscale data centers in Frankfurt, Germany.
The adoption and utilization of digital applications will continue to drive data center demand in North America due to more storage, computing, and processing of data. In addition, power delivery timelines will continue to increase in H2 of 2024 due to a shortage of readily available equipment, such as transformers, switches, and generators.
The report also expects markets such as Northern Indiana, Idaho, Arkansas, and Kansas to draw additional interest from hyperscalers and developers due to land availability and power availability timelines.
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