Demand from growing cloud-computing providers has set the U.S. data center market on pace to break 2017’s record leasing activity, according to CBRE’s latest U.S. Data Center Trends Report. The overall market saw more than 177 megawatts (MW) of net absorption in the first half of 2018, already nearly two-thirds of last year’s annual record net absorption total, despite the delivery of significant new supply.

In northern Virginia, the sector’s largest market in the United States (and the world), cloud users accounted for 65 percent of the market’s net absorption. “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,” says Pat Lynch, senior managing director, Data Center Solutions, CBRE.

Top U.S. Data Center Markets

Northern Virginia remained the most active data center market, with net absorption of 100 MW in 2018’s first half.

Rounding out the top ten most active markets are the following:

  • Phoenix (32.5 MW)
  • Dallas/Fort Worth (19.1 MW)
  • Silicon Valley (10.6 MW)
  • Austin/San Antonio (9.8 MW)
  • Chicago (9.4 MW)
  • Seattle (6.1 MW)
  • Southern California (5.2 MW)
  • Atlanta (3 MW)
  • New York Tri-State Region (2.5 MW).

Northern Virginia added 198 MW of supply since the first half of 2017, and will grow larger still, with an additional 297.2 MW under construction as of the end of the first half of the year.

Other markets with significant construction activity include the following:

  • Phoenix (61.4 MW)
  • Dallas/Fort Worth (45.6 MW)
  • Silicon Valley (29.5 MW)
  • Atlanta (21 MW)

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. The Silicon Valley vacancy rate fell below 5 percent for the first time, as there is a scarcity of high-quality space available.

“Tight market conditions in Silicon Valley have forced occupiers to expand into other markets, notably Phoenix, which has record levels of construction underway,” says Lynch.