As data center demand continues to increase, vacancy rates in many of the primary North American markets have reached record lows. This growth in demand can be attributed to businesses continuing to adopt cloud solutions and looking to expand their infrastructure post-pandemic. In 1Q 2022, 6 of the 10 primary markets experienced their lowest vacancy rates. For example, Dallas/Fort Worth had a vacancy rate of 5.34%, down from 12.31% a year prior. Over that same span, Chicago’s vacancy rate dropped to 5.55% from 9.12%. In Northern Virginia, there was a drop from 3.66% to 1.22%.

Vacancy Rates in Major North American Markets

One of the reasons for the declining vacancy rates is demand outpacing supply. In the primary North American markets, the absorption in 2020 and 2021 surpassed the addition of commissioned power by 38.7 MW and 82.2 MW respectively. As this trend drives vacancy rates lower, data center operators look to expand in order to meet continued demand.

Newly Commissioned Power Compared To Absorption

A majority of incoming supply is also pre-leased in these markets. Pre-leasing occurs when end users lease a facility before it is fully delivered. Both Northern Virginia and Northern California experienced over 93% of absorption in 2021 directly from pre-leasing. It is anticipated vacancy rates will remain low in markets where this pre-leasing continues.

Northern California Total & Pre-Leased Absorption

Northern Virginia Total & Pre-Leased Absorption

While there is high demand in these markets, there’s also a pathway for supply growth. Because the largest North American markets in commissioned power have low vacancy rates, they are experiencing high levels of under construction power and strong pipelines of future planned projects.

Given the increase in hyperscale demand, a rebounding enterprise user market, and a slower supply chain, low vacancy rates and increasing data center development are trends that will continue for years to come.