What's Happening?
Data center availability in North America has reached historic lows, with colocation vacancy rates dropping to 2.3% across the region, according to JLL. In major markets like Northern Virginia, vacancy rates have fallen below 1%. The surge in demand for cloud and AI services has driven up rents by 50% over the past five years, despite a doubling or tripling of supply in key regions. Enterprises are securing capacity 18 to 24 months in advance, indicating a shift from the 'build-it-and-they-will-come' model to 'commit-before-it's-built-or-you-won't-get-in.'
AD
Why It's Important?
The plummeting vacancy rates highlight the growing demand for data center space driven by cloud and AI services. This trend is reshaping the data center market, with significant investments from cloud service providers. The capacity crunch is expected to persist through 2027, impacting enterprises seeking colocation space. The situation underscores the need for increased infrastructure investment to meet the rising demand and maintain competitive rents.
What's Next?
With nearly three-quarters of the current pipeline under prelease agreements, the capacity crunch is likely to continue. Enterprises may need to explore alternative markets or invest in their own infrastructure to secure necessary capacity. The ongoing demand surge could lead to further investments in data center infrastructure, potentially exceeding $1 trillion by 2029.
