Cloud Giants Fuel Another Data Center Leasing Surge

Nikitha Sattiraju (Bloomberg) -- Demand for cloud services from big companies has spurred the leasing and construction of U.S. data centers to a record.

The data center capacity leased in 2019 jumped 33% from a year earlier to a record 396.4 megawatts, according to a report from CBRE on Wednesday.

More companies, particularly in finance and insurance, are shifting storage, human resource functions, salesforce management, and other operations to the cloud, said Pat Lynch, senior managing director of data center solutions at CBRE. As a result, cloud service providers like Alphabet Inc.’s Google, Amazon.com Inc. and Microsoft Corp. are gobbling up space to build more centers.

The total capacity of data centers constructed in 2019 also hit an all-time high at 488.7 megawatts. While 2020 may not see as much construction given the capacity reached last year, there will continue to be demand for “quality, purpose-built” centers as data usage in the country increases, according to Lynch.

Northern Virginia, the biggest market for data centers in the world, accounted for 64% of the capacity leased in 2019. The region, with its connectivity, competitive tax rates, and power costs, is ideal for data centers, said Lynch.