CoStar: Strong Leasing for Data Center Space

The CoStar Group has published data on the construction and absorption of data center real estate in 2006-08 as part of a larger feature on the strong market demand for mission-critical facilities.

Developers delivered about 671,000 square feet of office and flex telecom hotel and Web hosting space last year, compared with about 411,200 square feet in 2006, according to CoStar Property Professional data. Nearly 500,000 square feet of space is slated for delivery in the current quarter, followed by about 400,300 in the second half of 2008. With at least 1.8 million square feet in the construction pipeline in the current quarter, deliveries should remain brisk through 2009. More than 672,000 square feet of net absorption has been logged to date in 2008.

"We're measuring single-digit vacancies in the Silicon Valley. It's definitely a landlord's market," Jerry Inguagiato, senior vice president with the San Jose office of CB Richard Ellis Inc., told CoStar Advisor. "Users and developers are having to get creative to do greenfield or conversion development. If you're in the market now, you're going to have to wait to get a data center."

CoStar says its real estate databases track sales and leasing activity across 2 million properties representing 38 billion square feet of commercial space.