data center
Real Estate

NJ Data Center Demand Remains Hot

AI Operators Become Dominant Occupiers of Space

Strong demand for data center space during the second half of 2023 resulted in a new all-time low vacancy rate for New York Tri-State, dropping to 6.5% from 9.8% in H1, according to CBRE’s recent North America Data Center Trends report. The robust demand by Artificial Intelligence (AI) operators also impacted rental rates, which climbed to $130-$150 kW for a 3-10 megawatts (MG) requirement per month.

CBRE Senior Vice President Jon Meisel noted, “New Jersey continues to experience strong demand and leasing activity by cloud-based and co-location operations. During the second half of 2023, demand remained extremely high, with per kW pricing increasing 20% to 30% or more.”

“In addition to high demand and limited supply, publicly traded operators are seeking higher per kW pricing due to rising capital costs,” added CBRE’s William Hassan. “Power procurement issues are also delaying expansion plan timelines for existing campuses by 24 to 36 months, further putting a crimp on supply.”

During the second half of the year, AI companies pre-leased over 40 MG, with further expansions currently in negotiations.

Notable activity in New Jersey during H2 2023 included the completion of leasing at QTS’s Piscataway, NJ facility; and the pre-leasing of its building in East Windsor, NJ campus to an AI company. It is under construction to accommodate at least 20 MW. During the quarter, Equinix purchased a new building in Secaucus, NJ. A databank facility in nearby Orangeburg, NY, currently under construction, was fully pre-leased to an AI company. Expansion is planned for an additional 30-MW building.

National Trends

Northern Virginia remained the most active data center market in H2 2023 with 1,237 MW of construction and 424.4 MW of total absorption for the year. Prices also rose significantly to $150-$190 per kW/month from $100-$140 per kW/month (42% year-over-year increase). However, Phoenix led U.S. data center markets in average asking rates at $170 – $200 per kW/month.

Other notable markets include Atlanta, which saw a surge in building with 732.6 MW under construction – a 211% increase since H1 2023 (235.6 MW) and 388% increase from H2 2022 (150 MW). Dallas/Fort Worth reported strong preleasing activity, with 90% of capacity/space under construction (118 MW) already pre-leased.

To view the full report, click here.

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