As the digital age progresses and more business and personal platforms go online, data centers have seen rapid expansion across the U.S. These purpose-made units form the backbone of the digital economy, managing masses of information generated daily.
And as demand continues to grow, particularly in a new world of remote work, the data center sector of the real estate market has boomed. Now a hot investment, it’s worth taking a closer look at how the industry has expanded.
On that note, 42Floors and CommercialEdge have examined the sales and development of data centers across 90 U.S. markets, tracing their evolution between 2012 and 2021. Below are the key findings from the study:
Data Centers Witness Huge Growth Across the U.S.
Looking at the big picture, the report has unearthed some impressive stats. For example, across the 90 markets studied, new data center space grew by an estimated 33.4%. This equates to around 40.5 million square feet of new data centers built between 2012 and 2021.
As a result, the total square footage of data centers in the U.S. increased from 121.5 million square feet in 2012 to 162 million at the beginning of 2022. With several existing data centers — 37 million square feet, to be precise — changing hands during the decade, sales have recorded a total of $7.5 billion across all the markets studied.
Biggest Data Center Sales Over the Past 10 Years
The biggest data center sale of the previous decade was Washington, D.C.’s Quantum Park. It topped the leaderboard, boasting a price tag of $301 million when it was last bought in June 2021 by Landmark Dividend. The office and data center property has changed hands several times over the last ten years, however, each time fetching an impressive price. Indeed, it featured in the top ten three times, placing first, third and ninth.
In 2016, it was acquired by AGC and Partners for $193 million, and since then, the campus has been leased to telecommunications giant Verizon. Before that, American Real Estate Partners paid $132 million for Quantum Park in 2015.
Other data centers with a high price tag include Philadelphia’s 401 North Broad Street, formally known as the Terminal Commerce Building. It was most recently bought in 2014 when Netrality Data Centers paid $200 million for the Center City property. Occupying an entire city block and boasting its own zip code, 401 North Broad Street is among the East Coast’s most network-neutral and fiber-dense facilities.
Top Markets by Data Center Sales Volume
In terms of sales volumes over the last decade, some markets stood out in the study. Across the top 20 markets for investment, data center sales amounted to almost $6.5 billion, covering around 29 million square feet of space.
Again, Washington, D.C., took the number one spot, accounting for around 22% of the total space traded in the top 20 markets. With 27 deals over the previous decade, the total sales volume reached $1.4 billion across 6.4 million square feet, making it the country’s largest digital infrastructure hub by a large margin. The estimated price per square foot stands at $224.
Meanwhile, the Bay Area saw 667 million in sales, ranking second on the list. With an estimated price per square foot of $405, deals in the Bay Area took in 1.6 million square feet across 16 deals.
In third place, Chicago closed almost $600 million in data center deals between 2012 and 2021 across 3.1 million square feet. With 22 deals, the Midwestern powerhouse is proving particularly popular among developers and investors focussing on data centers. Boasting large areas to build, a rapidly expanding high-quality fiber connection network, and low temperatures much of the year to aid cooling, it’s clear why. Not to mention the reduced operational costs, in addition to local incentives targeting data center usage and a low risk of natural disasters.
Leading Markets for New Data Center Construction
With an estimated growth of 33.4% across the board, new data center spaces have been springing up nationwide. However, some markets boasted far higher growth than others, with several data center hubs throughout the country.
Once more, Washington, D.C., took the top spot, with around 14.2 million square feet of new data center space seeing completion over the previous decade. Bringing the total up from 11.2 million square feet in 2011 to 25.5 million at the close of 2021, the data center sector grew by an impressive 128%. This perhaps comes as no surprise if you’re familiar with northern Virginia’s so-called Data Center Alley, which has been instrumental in powering connectivity since the beginnings of the internet. To this day, data centers in the region provide digital infrastructure to some of the largest tech firms on earth, such as Google, Meta, Microsoft and Amazon.
Outside the country’s most familiar data center hub, the Dallas-Fort Worth market has also enjoyed rapid growth over the past ten years. With an extra 5 million square feet of new space added, its inventory grew by 56%, helped by its pro-business environment.
In third place, Columbus has seen its data center market expand by a whopping 146% over the past ten years. From 1.9 million square feet in 2011 to 4.6 million at the close of 2021, the addition of 2.7 million square feet of data center space has been spurred on by affordable land, a low rate of natural disasters and reliable power.
Largest Data Center Markets in the U.S.
Topping the leaderboard again, Washington D.C. has retained its position as the largest U.S. data center market. Boasting more than 25 million square feet of data center space, it’s well ahead of the competition.
In second place, the Dallas-Fort Worth market encompassed almost 14 million square feet at the close of 2021. Following a veritable tech revolution in the region, the Texas metroplex has become an increasingly popular alternative to the West Coast for doing business in the various digital sectors. And it seems like this trend is set to continue and escalate. For example, early reports into the state of the data center market in the first half of 2022 have shown that data center absorption in Dallas was a record five times the previous annual amount.
But Dallas-Fort Worth isn’t the only up-and-coming data center hub. The Chicago metroplex took third place in the rankings, closing the decade with data center space amounting to around 9.5 million square feet. Unfortunately, the future isn’t so secure for Chicago, as suitable land for data center development begins to dry up. However, developers and municipalities alike are keen to continue the progress, planning ahead to ensure the previous growth isn’t stunted in the coming years. New Jersey and Atlanta rounded off the top five, despite seeing very little, if any, expansion over the previous decade.
However, the future looks bright for the data center sector in general. With new technologies on an upwards slope, demand for ever-more sophisticated data centers continues to grow. Indeed, developers may struggle to keep up, ensuring opportunities for new markets to emerge and traditional ones to grow and adapt. In addition, geographical location will continue to play a role, with certain climates presenting fewer or more challenges, as well as the availability of local power and energy.