CHICAGO—The increasingly common use of smartphones sent demand for new data centers soaring in 2016, and the resulting development boom shows no sign of abating. According to a new mid-year report from Chicago-based JLL, data center construction in North America has so far increased 43% from 2016. Leasing activity slowed down from the breakneck pace seen in the first half of 2016, but experts say all the signs point to the sector getting another boost over the next six months.

“In the first half of 2016, we saw the large cloud providers lease a tremendous amount of space,” Curt Holcomb, a Dallas-based executive vice president with JLL, tells GlobeSt.com. And these firms seem to have taken a breather this year as they concentrate on utilizing the space taken up in 2016.

In the first half of last year, users absorbed 249.1 MW, but during the same time frame this year that figure shrunk to 186.2 MW. By the end of 2016, with cloud providers in the lead, users had absorbed more than 350 MW in the US, and 46 MW in Canada.

But the data center market does not wholly depend on cloud providers. Although these companies were responsible for between 60% and 70% of the 2017 absorption in top markets like Northern VA and Chicago, in the data center hubs of Dallas and Atlanta their share was 35% or less.

Mason Mularoni, a Boston-based senior research analyst with JLL, adds that the leasing slowdown was also partly attributable to a constriction in new supply. In Northern VA, the US market leader, users absorbed 41 MW in 2017, putting the region far ahead of Dallas and Chicago, the second and third busiest markets with 27 MW and 23.6 MW, respectively. But Northern VA had recorded 55 MW of absorption by this time last year, and JLL found that recently the market has suffered from a shortage of big block spaces.

But developers there continue to build at a historic clip. JLL found that 190 MW is currently under construction, and another 172 MW is in the planning stages. In total, 506 MW is under construction across North America, a significant boost over the 353 MW underway one year ago.

Mularoni believes users will absorb this new capacity, even if cloud providers continue taking a break from leasing activity. Last year, this latter group took up so much space it actually pushed out other users in many markets. As a result, there now exists a lot of pent-up demand from big enterprises in tech, healthcare, telecom, banking and other fields, which should fuel much of this year's leasing. “This has created an opening for Fortune 1000 firms,” he says.

Instant Insights /

Data Center Construction Soars Nationwide

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