Data Center Development Activity Above Historical Averages In Austin And San Antonio
Activity Above Historical Averages in Data Center Development in Austin and San Antonio; Data Center Vacancy Rates Continue to Drop Despite New Inventory…
Austin, TX – In H1 2018 demand for data centers remain stable in the Austin and San Antonio markets, with much of the market demand coming from large, hyperscale users offering a mixture of internet cloud exchanges, according to CBRE’s latest U.S. Data Center Trends Report.
The markets have seen activity above historical averages in data center development due to large expansions and an increase in smaller wholesale deployments.
Austin and San Antonio have added 9.0 MW of inventory since H1 2017, with 8.0 MW under construction to meet demand. Despite the new supply, the market’s vacancy rate dropped 130 basis points year-over-year to 8.1 percent.
The San Antonio market is largely dependent upon large cloud requirements, which have driven more than 90 percent of the overall leasing activity in the market in recent years. The Austin market is driven by state entities, local businesses and several large technology companies.
“The Austin market is seeing a record number of technology companies growing locally, and most of those companies have accompanying data center requirements. While not always large, it has created a healthy environment for continued growth. We do believe that developments outside of the regulated power market could drive interest in significantly larger data center requirements,” says Haynes Strader, Senior Associate on CBRE’s Data Center Solutions team.
“Both San Antonio and Austin have low hazard risks and serve as excellent disaster recovery locations for some of Texas’ key production loads. As Texas continues to lead the nation in economic growth, we anticipate data center demand to follow,” says Brant Bernet, Senior Vice President leading the Data Center Solutions team for CBRE in Texas.
National Trends
Demand from large cloud users has set the U.S. data center market on pace to break 2017’s record leasing activity. The market saw more than 177 megawatts (MW) of net absorption in H1 2018, already nearly two-thirds of last year’s annual record net absorption total, despite the delivery of significant new supply.
Other report findings include:
- Strong demand has resulted in more than 474 MW of capacity under development in the primary U.S. markets, nearly 55 percent of which is preleased.
- U.S. data center investment volume reached $7 billion in H1 2018, inclusive of single-asset, portfolio and entity-level transactions.
- H1 2018 investment activity was balanced between transaction types, as opposed to in 2017, when investment was driven by entity-level transactions. Single-asset and portfolio transactions accounted for 48 percent of total volume in H1, compared to only 27 percent in 2017.
- Northern Virginia, Phoenix, Dallas/Ft. Worth, Silicon Valley and Austin/San Antonio saw the most leasing activity in H1 2018.
“We do not expect to see a slowdown in demand from cloud users in the near future, as end-users continue to migrate their IT needs to the cloud to save costs and for added flexibility,” said Pat Lynch, senior managing director, Data Center Solutions, CBRE.
“While 2018 investment volume may not reach 2017’s record setting investment of more than $20 billion, we still expect the investment market to produce strong results, driven by sale/leasebacks from enterprise users, cloud users looking for development partners and a continued influx of new investors into the data center sector,” Mr. Lynch added.
[divide icon_position=”left” width=”short” color=”#”]Source: CBRE Group, Inc.
