Page 20 - RE-NJ

18 MAY 2024
LEVELING UP
A new wave of data center demand is coming to New Jersey, but supply may be tighter than ever
Demand for data center space in New Jersey is surging on the back of Big Tech and the
artificial intelligence arms race. And while a lack of electrical capacity may keep a lid on new supply, the owners of existing facilities are now racing to expand their footprints.
It’s also a new opportunity for those with developable land — at least the kind that can support the complex, highly specialized needs of AI platforms and other innovations.
“We’ve been trying to get as smart about this segment as we can because of the number of inquiries that we’ve been seeing, on sites that we own or are under contract to buy, for this particular use,” said David Greek, a
managing partner of East Brunswick- based Greek Real Estate Partners. That interest has highlighted the
“specific items” that data center users are seeking — namely, access to power and security — and “there is such
a limited set of
sites that have that in place already, that the users
know exactly where they are.”
Data center vacancy in the New York tristate area fell to an all-time low in the second half of 2023, to 6.5 percent, according to a report
by CBRE, thanks largely to demand tied to artificial intelligence. The firm noted that AI companies preleased more than 40 megawatts in the region during that period, with notable
deals including a lease at QTS’ expanded facility in Piscataway and the preleasing of a 22-megawatt, 554,000-square-foot project in East Windsor.
Meantime, rental rates in the region rose during the second half of 2023 to $130 to $150 per kilowatt for a three- to 10-megawatt requirement per month, CBRE found.
“We’re starting to see a real supply shortage,” said Jon Meisel, a senior vice president with CBRE. He noted that many of New Jersey’s
longstanding data center owners have shown
restraint in
recent years
with respect
to new
development,
following a
building boom
more than a
decade ago
that was fueled by big banks, media and other sectors. Users have been “nibbling away at our inventory” ever since, as other U.S. markets have blossomed with the help of lower utility costs, government incentives and large-scale requirements from tech firms.
By Joshua Burd
David Greek
Jon Meisel