Data Center Real Estate Review: 2020

Jim Kerrigan, Bespoke Founding Team Partner

Overview of Issues Impacting Data Centers in 2020

  • Overall, Multi-Tenant Data Center (MTDC) leasing activity in the U.S. in 2020 was just under 700 MW was more than three times greater than that in 2019 and twice that of 2018, which means it was the best all-time year for MTDC leasing.
  • Several of these transactions involved the expansions of hyperscale tenants in the same location.
  • Northern Virginia (NOVA) led the charge, leasing more than 500 MW which doubled 2018 and was 80% of the total for U.S. and Canada.
  • The low rental rates resulting from the significant inventory at the beginning of the year in NOVA increased (for the smaller tenants) during the third and fourth quarters.
  • Microsoft dominated the leasing on a national basis, supplemented by Bytedance (Tik Tok) and Facebook in Northern Virginia, and Cloud HQ, Aligned Energy, and Digital Realty Trust were the beneficiaries of this leasing.
  • The strong leasing activity during the second quarter stemmed from hyperscale companies, as many of these tenants pulled forward their requirements as a result of the distributed workforce and the work-from-home lifestyle.
  • In addition to remote work, online gaming, social media, video streaming, and ecommerce all drove leasing activity during the pandemic.
  • An uptick occurred in enterprise, and hyperscale users focused on their carbon footprints.