Page 22 - RE-NJ

20 WINTER 2024
IT’S COMPLICATED
Power, infrastructure constraints loom large as experts
weigh data center growth in New Jersey
By John Yocca
The data center landscape in the
U.S., particularly in New Jersey,
is experiencing signifi cant growth
driven by the evolution of technologies
such as artifi cial intelligence and cloud
computing. Yet there is still a good deal
of uncertainty around how to meet this
growing need.
It was a key theme recently during a
program hosted by NAIOP New Jersey,
where panelists highlighted the expan-
sion of the asset class and the Garden
State’s strategic importance as a data
center hub, but one that faces major
questions about its power supply.
“The market is very strong and will
continue to be
so for the next
fi ve years,” said
Sean Brady,
a managing
director with
Cushman &
Wakefi eld, noting
that the U.S. is
Sean Brady
the largest data
center market globally, with 3,000
facilities and 400 new ones being added
annually. He also cited a 7 percent
annual growth in third-party cloud
services over colocation — where
companies lease space and manage
their own servers in a data center —
driven by the rising demand for AI
processing, which is expected to take
over as the primary driver of growth.
New Jersey was once the largest data
center market in the U.S., especially
prior to 2012. It became a hub due
to the abundance of corporate
headquarters and the proximity to Wall
Street.
Today, the state remains a critical
player, hosting 88 colocation centers
and ranking among the top 15 U.S.
markets, Brady said during the Sept. 26
panel discussion, which was moderated
by Sitex Group’s Blake Chroman.
However, the state is facing challenges
related to power availability, with wait
times of two to three years for 20 to 40
megawatts of power.
Despite these challenges, New
Jersey still boasts 441 megawatts of
operational power, with 82 megawatts
under construction, including 26
megawatts from recent transactions
and another 30 megawatts in the
pipeline for corporate clients. AI users
alone have accounted for 8 megawatts,
according to Brady.
The New Jersey market is also seeing
rapid price growth. In early 2024, rents
ranged from $126 to $130 per kilowatt
per month, but by midyear, rates had
surged to $200 per kilowatt. This trend
is expected to continue due to the
limited availability of space, with larger
deals driving down the vacancy rate to
as low as 1.5 percent.
Vacancy across these markets stand at
approximately 5.8 percent, although
availability varies based on size
requirements, Brady said.
AI’S IMPACT ON DATA CENTERS
AI is playing a transformative role in
the data center industry, as panelists
discussed during the program at
Embassy Suites by Hilton Berkeley
Heights. According to Terence
Deneney, a
senior vice
president at STO
Building Group,
the size, power
and density
requirements
of AI-driven
data centers
Terence Deneney
have increased
dramatically over the past few years.
In 2021, most data centers STO built
were single-story buildings with
power densities of 20 to 35 kilowatts
per cabinet. Today, he said, power
densities are reaching up to 125
kilowatts per cabinet, with some
facilities requiring more than 400
megawatts of power.
As AI becomes more prevalent, large-
scale data centers will need to be
located closer to major population
centers due to the increasing data
processing and transmission demands,
Deneney said.