Soaring demand for U.S. data-center facilities marked one of the largest investments in commercial real estate properties last year, fueling expectations that 2018 is on track to be another strong year for this sector, according to BBG, an independent national commercial real estate valuation, advisory and assessment firm.
Investment in the nation’s data centers was estimated at $20 billion in 2017, nearly three times the investment ($7.78 billion) in the prior year and about five times of that amount ($4.7 billion) seven years ago, according to industry sources.
In 2017, data center absorption rates remained high, with the top 15 markets reaching 337.2 MW (megawatts), about 20 MW shy of its record year in 2016. Demand for data center space is measured in absorption rates instead of square footage. One megawatt equals one million watts.
The top regions for data center activity included Northern Virginia (115.0 MW), Chicago (44.0 MW), Dallas/Fort Worth (43.0 MW), Phoenix (20.9 MW), Las Vegas/Reno (22.0 MW), and Austin/San Antonio (21.0).
The acceleration of cloud computing technology continues to be a major force in boosting demand for data centers, as more businesses move their information technology operations to cloud platforms to handle an insatiate appetite for all things digital. A Statista report said global IT spending is expected to hit $2.3 trillion in 2020.
BBG CEO Chris Roach commented on the surging demand for data centers: “We anticipate a robust data center market in the foreseeable future, driven by the ongoing digital transformation of how businesses and consumers interact with each other. As a result, more data centers will need to be built or renovated, in order to provide the storage capacity required for the exponential growth in data usage.”