The demand for data center leasing is reaching new heights, particularly in non-traditional locations. A recent report from JLL revealed that the North American data center market experienced an impressive surge in leasing activity during the first half of 2023. Cloud and artificial intelligence (AI)-driven demand are fueling this growth, prompting tech enterprises to secure data center space well in advance.
Typically, core markets are constrained by available power, pushing data-driven tenants into secondary and tertiary markets. This trend is reshaping the leasing landscape. In fact, established markets like Northern Virginia trail behind newer markets such as Phoenix and Denver in terms of new leases.
Megawatts replace square footage as the primary benchmark of data center leases. One megawatt is equivalent to 4,000 servers and requires an immense source of power. In the first half of 2023 alone, North America saw 1,236 megawatts in new leasing. Currently, more than 3,000 megawatts are available in the U.S. market pipeline. Prospective tenants, from tech giants to startups, are negotiating early in the development process to ensure their wattage will be secured in these growing hubs.
Previously, cloud providers were the demand drivers of data center expansion, but a new catalyst maintains full throttle. Major tech companies and the AI arms race has doubled data center megawattage since 2018. This is a direct result of AI centers requiring more megawattage than cloud companies. They’re building bigger sites with more power and creating new tech hubs where resources allow. Big-picture economic concerns seemingly haven’t phased this industry or its budding pipeline.
- Barr, A. “Nvidia CEO predicts $1 trillion will be spent over 4 years upgrading data centers for AI. A lot of that bill will probably be paid by Amazon, Google, Microsoft, and Meta.” Retrieved August 25, 2023 from www.businessinsider.com
- Miller, R. (2009, Nov). “Data Center Leasing: It’s All About the Megawatts” Retrieved August 25, 2023 from www.datacenterknowledge.com