CBRE: North American Data Center Pricing Approaching Record Highs

Per CBRE’s latest North American Data Center Trend report, the cost for operating a North American data center approached “record” levels in 2023, impacted by increased demand and power constraints limiting new capacity being brought online.

In all, the national average for asking prices rose to $163.44 per kW/month in 2023, marking 19 percent growth over 2022’s $137.86. This amount, CBRE noted, will likely also experience double-digit growth in 2024. Meanwhile, supply in the eight primary U.S. data center markets grew by 26 percent, totaling 5,174.1MW, with vacancy at just 3.7 percent.

“The U.S. data center market saw the largest pricing increase of all commercial real estate assets last year, which is a testament to the market’s resiliency and impact of robust requirements for available power,” said Pat Lynch, executive managing director for CBRE data centers solutions. “There is no sign that demand will slow down as the economy becomes more digital and artificial intelligence expands to new sectors. More operators and developers are prioritizing decisions that allow them to provide high value, technologically advanced spaces, which will help to drive future demand.”

Data center construction also reached a new high in H2 2023, with 3,078MW under construction in primary markets, marking a 46 percent increase from the same time last year. With AI driving demand across most major markets and project delays persisting, securing space early is crucial. To that end, 83 percent of under-construction supply is already pre-leased.

While supply chain disruptions have eased, construction costs are rising due to ongoing shortages in critical materials such as generators, chillers and transformers. That trend is likely to persist throughout the year. Power constraints are creating opportunities for emerging data center markets in Nevada, Indiana and Wisconsin to host large data center facilities.

Northern Virginia remained the most active data center market in H2 2023, with 1,237MW of construction and 424.4MW of total absorption for the year. Prices also rose significantly to $150-$190 per kW/month, from $100-$140 per kW/month.

“There are several trends influencing the U.S. data center market as we head into 2024,” said Gordon Dolven, director of Americas data center research, CBRE. “New markets for development are emerging due to tax incentives, advancements in renewable energy, power availability and a need for accelerated completion timelines while artificial intelligence is shifting how operators choose select sites.”