CHICAGO—A robust demand for data center space continued throughout primary markets in the first half of 2015, according to a new study on the second quarter from CBRE. And new construction has kept pace with the demand. Users absorbed 94.8 MWs of critical power in the first two quarters alone, a rate that could match 2014 absorption levels. Providers have responded with 99.9 MWs of new construction deliveries since the beginning of 2015, and have another 184.4 MWs of inventory in the construction pipeline, up 76.6 MWs in the second quarter of 2014.

"On a macro level, the development out there is as good as it's ever been,” Chad Freese, a Chicago-based executive vice president at CBRE, tells GlobeSt.com. “Companies have embraced the cloud as a solution for their IT platform,” and this has created much of the demand for new space by the cloud providers, especially in the primary colocation markets of New York/New Jersey, Northern Virginia, Chicago, Phoenix, Silicon Valley and Dallas.

“As a result of increased demand primary markets are reporting lower vacancy rates despite notable construction deliveries,” according to the CBRE study. “With the compression of vacancy rates across all markets, upticks in lease rates are occurring in some markets while others continue to hold firm on current rates.”

In the second quarter, developers in the Dallas area had 43.3 MWs in the construction pipeline, the most of any primary city. Northern Virginia came in second with 42.4 MWs. Silicon Valley had 33.8 MWs in the pipeline; New York/New Jersey had 23.6 MWs and Chicago 17.5 MWs.

The amount of new Chicago development is about half the amount that developers usually had underway in the Chicago region just a few years ago, but Freese says this shows an important and beneficial trend. “That amount aligns with the historic amount of data center absorption.”

“Many of the largest data center providers have shifted some of their focus overseas for deployment of capital,” he adds. “The international markets represent an opportunity where the supply and demand dynamics are misaligned and thus yield higher returns as the US primary data center markets did 7 to 10 years ago.”

Furthermore, in the recent past “demand trends weren't as refined as they are now. The industry is not that old, and unlike for office and industrial properties, there are not decades of data to examine. The IT leaders of many companies did not want to be caught without capacity,” and usually erred on the side of oversupply. Today, however, industry experts can predict customer demand with far greater accuracy.

DuPont Fabros Technology, Inc. just opened its CH2 data center facility on 15 acres of land just west of Chicago in Elk Grove Village. The new center now has 7.1 MWs of critical load capacity and five computer rooms totaling nearly 45,000 square feet of white space. DFT also recently secured its first pre-lease on the facility, making it 20% leased. Company officials say this facility is smaller than CH1, located across the street, but much more energy efficient.

"There are many reasons for us to expand our presence in Chicago, including customer demand, Cook County's competitive power rates, enhanced accessibility to O'Hare International Airport and Chicago's reputation as one of the country's leading telecommunications infrastructure cities," says Chris Eldredge, president and chief executive officer of DFT.

“Chicago as a strategic location will continue to thrive,” Freese says. But the market will probably not see 30 MWs of commissioned capacity in the construction pipeline in any single year moving forward. “I think it will be much more disciplined.”