Driven by demand from social media and cloud services companies, as well as new tax incentive legislation, Chicago saw the sixth-most data center leasing activity in North America in H1 2020, according to CBRE’s latest North American Data Center Trends Report.
Chicago saw 7.3 megawatts (MW) of net absorption in H1 2020, up approximately 55 percent from the same period a year earlier. Despite 20 MW of new capacity added since the end of H1 2019, the market’s vacancy rate dropped 40 basis points year-over-year to 13.7 percent. Chicago remains the fourth largest data center market in the U.S. by capacity.
“Activity has increased this year and we expect demand to remain strong for the foreseeable future,” said Jordan Thompson, vice president with CBRE’s data center solutions group in Chicago. “With its central location, infrastructure and access to a massive population, the Chicago market will continue to be a critical market for data center activity.”
The North American data center sector was resilient in the first half of 2020 as many businesses implemented hybrid IT infrastructure to improve their remote work capabilities and streaming content providers saw increased viewership due to the COVID-19 pandemic.
The seven primary U.S. data center markets saw 134.9 MW of net absorption in H1 2020—down from record levels in the first halves of 2019 and 2018, but still higher than the same period in 2017 and 2016. The vacancy rate in the primary markets dropped 70 basis points year-over-year to 10.3 percent despite a 5 percent growth in inventory during H1. The decline in net absorption in H1 2020 was largely due to increased supply.
“The economic slowdown will force companies to scrutinize every dollar of their IT spending, but continued investment in mission-critical IT infrastructure like data centers and cloud services will be imperative to supporting business continuity and remote working,” said Pat Lynch, senior managing director, data center solutions, CBRE. “The outperformance of data center REITs compared to other public real estate securities so far in 2020 has brought new investor interest to the sector, which will likely result in increased development activity.”