By Joshua Burd
Data center vacancy in the tristate area reached an all-time low in 2020, according to CBRE, thanks in part to demand fueled by cloud providers, health care and financial institutions.
A new report by the real estate services firm found that net absorption for data centers in New York, New Jersey and the surrounding markets totaled 3.3 megawatts in 2020. That was down from nearly 9 megawatts in 2019, the report found, but enough to drive vacancy to a low of 8.8 percent in what had been one of the most active sectors before the pandemic.
CBRE also noted that new construction is underway that will add 23.6 megawatts of capacity, bringing much-needed supply to the region’s total inventory of 149.1 megawatts.
“The tristate market turnkey data center capacity is nearing historic lows fueled by social media companies, as well as more traditional users like health care and financial services companies,” said Jon Meisel, a senior vice president with CBRE. “The lack of supply is reaching dire levels in terms of accommodating ongoing expansions, not to mention attracting new users to our market.”
The report said health care and financial services users continue to lead the absorption of turnkey space in the data center market. That included a large New York City health care provider’s recent lease of roughly 750 kilowatts in Piscataway, along with a major social media company that committed to space earlier this year and is now looking to expand.
The research also highlighted development activity, including Digital Realty’s 600,000-square-foot facility now under construction in Totowa. Elsewhere in North Jersey, CBRE said a global bank is nearing completion of a 250,000-square-foot, purpose-built facility.
“Many companies are re-evaluating their digital requirements and have prioritized the importance of data centers,” said CBRE’s William Hassan, a first vice president based in the firm’s Saddle Brook office.
The New York area still lags other markets in terms of activity and inventory, according to the report. Overall, the country’s top seven data center markets recorded 329.6 megawatts of net absorption in 2020, with Northern Virginia leading the way with 217.2 megawatts.
Vacancy within the seven markets, which includes the tristate area, fell 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,” said Pat Lynch, CBRE’s senior managing director for data center solutions. “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.”