Work-From-Home Demands Spur Growth at DFW Data Centers

Digital transformation plans compress from years to months amidst COVID-19.

COVID-19 spurred growth in existing Dallas data centers in the first half of 2020 as companies sought more capacity for productive working from home while new leasing and construction slowed, experts say.

While 2019 was “a very sleepy year” for local data centers, with about 26 megawatts of absorption —down from 40 to 45 megawatts in the prior few years—the first two quarters of 2020 has had about 24 megawatts of increased inventory, according to Haynes Strader, Vice President of Data Center Solutions at CBRE.

“That’s a really good kickback into activity. And we’re also seeing several cloud providers circling the market, both from a colo and development standpoint,” Strader said in a recent interview on “Not Your Father’s Data Center Podcast.”

The pandemic and increased user demands due to work-at-home orders accelerated digital transformation plans for many companies, tightening timelines from a few years to a few months.

While many existing data centers received a boost from demands related to COVID-19, the market for new leases and data center construction slumped as some companies paused future plans.

In Q2 of 2020, leasing activity for data centers declined to 2.98 MW of net absorption, most likely due to economic uncertainty, according to a CBRE market report.

The current overall vacancy rate in data centers is 17.6 percent, the lowest vacancy rate since 2018, and CBRE experts predict leasing will continue to go up in the second half of 2020 with the increased digital demands.

Just 15 megawatts in new construction is currently underway in the Dallas region, down 18.2 MW from a year ago. In the first half of the year, CyrusOne, DataBank, Digital Realty, and QTS delivered new capacity at existing facilities and Equinix opened its newest DA11 facility on North Stemmons Freeway near Oak Lawn Avenue.

As uncertainty around the pandemic continues, Strader sees opportunities for growth in the industry.

“For a lot of technology services and financial services, the move to digital infrastructure and the expansion of their current digital infrastructure has been felt. And in Texas, that’s no exception,” he says. 

A version of this story first published in the Summer 2020 edition of the Dallas-Fort Worth Real Estate Review.

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