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DMV Data Centers Exploding

DMV data centers exploding

As a Native Washingtonian, seeing the transformation of this region has been fascinating. From the I-270 Corridor, Chinatown, Navy Yard/Wharf, Tysons and Reston, the growth over the past 40 years is tremendous. Some of the most robust areas of growth were literally cow pastures not too many years ago. While the commercial real estate industry has its ups and downs, the performance of the asset types differ greatly: demand for warehouse space is strong, demand for office and retail space is weak. Demand for data centers has reached new heights. After all, were you on Zoom or Teams today?

The farms of past in Northern Virginia now possess over 23 Million square feet of 140 Data Centers occupied by the likes of Amazon, Facebook, Oracle, Google, Comcast and Microsoft, positioning it as the world’s largest data center market. Likely, most importantly due to the largest global consumer, the US Government.

The first half of 2020 established a record high with 257 MW of transactions. To put this performance into perspective, the recent absorption numbers in Northern Virginia equate to more than 10 of the largest 15 global data center markets combined. Avison Young is currently tracking 179 MW scheduled to deliver in 2021, and the future pipeline in 2022-2023 is estimated to be 295 MW. Together, these deliveries total 474 MW over a three-year span.

So, what does this all mean?

As we move to a more virtual world, this means more data, more cloud, more storage, more cyber. Because of this, vacancy rates are tightening, land prices are increasing and investment demand is high across the data sector space. Over the next 3-4 years, 4B devices will be connected to the internet; each creating 2,500 times more data than we absorb today. Edge Computing, 5G and autonomous technologies evolve and expand the network while attracting additional demand in Hub markets (Northern Virginia included).

Existing top tenants such as Google, Facebook, Amazon, Microsoft, and others will continue to grow over the next 5-10 years and beyond. As technology demands increase, more job creation should funnel throughout the region.

Matthew Goldberg of Avison Young specializes in consulting and advising Technology companies for their Real Estate requirements throughout the Washington DC region. Avison Young’s product AVANT allows tenants to access any data they need around the real estate market and the cities and sectors they operate in at their fingertips.

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