NJ Data Centers Hit Record Low Vacancy in 2023 Amidst Unprecedented Demand

During the second half of 2023, the New York Tri-State area saw a surge in demand for data center space, leading to a record-low vacancy rate of 6.5%, down from 9.8% in the first half of the year. This information stems from CBRE's recent North America Data Center Trends report.

Impact on Rental Rates

The heightened demand, particularly from Artificial Intelligence (AI) operators, drove rental rates up to $130-$150 per kilowatt (kW) for a monthly requirement of 3-10 megawatts (MW).

Observations by CBRE Executives

According to CBRE Senior Vice President Jon Meisel, New Jersey witnessed significant demand and leasing activity, particularly from cloud-based and co-location operations. Per kW pricing saw a notable increase of 20% to 30% or more during the latter half of 2023.

CBRE's William Hassan highlighted that publicly traded operators are seeking higher per kW pricing due to escalating capital costs. Additionally, power procurement issues are causing delays in expansion plans for existing campuses, stretching timelines by 24 to 36 months.

Expansion and Pre-Leasing by AI Companies

AI companies pre-leased over 40 MW during the second half of the year, with ongoing negotiations for further expansions.

Notable Activity in New Jersey

Noteworthy developments in New Jersey during the second half of 2023 included the completion of leasing at QTS's Piscataway, NJ facility and the pre-leasing of its East Windsor, NJ campus to an AI company, with construction underway to accommodate at least 20 MW. Equinix also acquired a new building in Secaucus, NJ. Additionally, a databank facility in nearby Orangeburg, NY, currently under construction, was fully pre-leased to an AI company, with plans for an additional 30-MW building expansion.