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The data center industry is undergoing rapid changes, driven by technological advancements, increased demand, and evolving market dynamics. CBRE’s recent report on North America Data Center Trends for the first half of 2023 provides valuable insights into these shifts. Here’s a breakdown of the key takeaways.

Market Dynamics: Supply and Demand

Supply Surge
The report reveals that the supply in primary markets has seen a significant increase, with a 12% rise in H1 2023 compared to H2 2022. This translates to an additional 491.5 MW of capacity.

Record Construction
An all-time high of 2,287.6 MW is currently under construction in primary markets, marking a 25% year-over-year increase.

Resilient Absorption
Despite challenges, primary market absorption remained resilient, totaling 468.8 MW, only slightly less than the 484.8 MW absorbed in H1 2022.

Low Vacancy Rates
The overall vacancy rate for primary markets is at a near-record low of 3.3%, indicating strong demand.

Pricing and Leasing Trends

Rising Costs
The average asking price for a 250- to 500-kW requirement increased by 7.2% in H1 2023, reaching $147.81 per kW/month.

Strong Preleasing Activity
A noteworthy 73.1% of the under-construction capacity is already preleased, highlighting the strong demand and developer confidence.

The AI Impact

AI as a Demand Driver
Artificial Intelligence (AI) is becoming a significant factor driving demand across most major markets.

AI’s Growing Influence
AI usage and new use cases have grown tremendously in H1 2023, affecting network requirements and performance capabilities.

The Role of Edge Data Centers
Edge data centers are becoming increasingly important in the AI ecosystem, reducing latency and enabling closer data processing.

Power and Infrastructure Challenges

Power Constraints
Most major markets are grappling with power constraints, affecting both construction timelines and market selection.

Infrastructure Delays
Lack of readily available power and extended lead times for key infrastructure are causing delays in construction timelines.

Future Power Issues
Power availability and capacity will continue to be critical issues for developers and operators in 2023.

Investment and Financing

Capital Attraction
Market fundamentals such as increased tenant demand, low vacancy, and positive rental growth continue to attract new capital sources.

Investor Interest
There is sustained interest across the risk spectrum, making data centers an attractive investment avenue.

Future Considerations
The report also raises several pertinent questions about the future of the industry, such as the role of renewable energy, the impact of AI on rural markets, and the transition from 4G to 5G.

In light of the challenges and opportunities presented in the CBRE report, Layer 9 Data Centers emerges as a viable solution for businesses looking to navigate the complex data center landscape. Contact our team to learn more.

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