Data Center Site Selection: Global Hot Spots in 2023

Northern Virginia continues its dominance as the top data center market in the world, according to the 2023 Global Data Center Market Comparison report published by real estate services firm Cushman & Wakefield.

Yet Northern Virginia isn’t alone in taking the highest spot — it ranks together with Portland, Ore. for the first time. According to the report, “Portland rocketed from 10th place to sharing the top of the overall standing this year. This is due to the rapid expansion of hyperscale activity in the Hillsboro submarket, as well as relatively favorable pricing, sustainability options, low environmental risk, and more available land.”

Portland could rival Northern Virginia given the pause in data center builds in Loudoun County and pending laws that could slow the data center industry’s growth in the region. Other U.S. cities also rounded out the top ten markets worldwide, broadening the range of areas to choose from and uncovering a global trend toward more promising locations.

“Hyperscale tenants continued their relentless expansion across regions, with specific interest toward secondary and emerging markets. Colocation providers and developers have followed suit,” the report notes. “Established markets have faced growing headwinds due to government intervention and constraints on available power and land. Secondary markets are anticipated to continue their growth in importance as certain primary markets have run into constrictions, with power usage and sustainability scrutinized more carefully.”

Related:Data Center Legislation: How New Laws Affect Industry Growth

Cushman & Wakefield ranked data center markets based on a number of weighted factors, including fiber connectivity, cloud availability, incentives and taxes, political stability, development pipeline, sustainability, power cost, land price, and environmental risk.

Data Center Site Selection: Top Markets in the U.S.

Atlanta, Chicago, and Silicon Valley all placed fifth in the global rankings. Despite Silicon Valley’s high land costs, its proximity to and abundance of tech sector players makes it an attractive location for data centers. Meanwhile, Atlanta and Chicago have lower land costs and a robust data center development pipeline. Completing the list are Dallas in eighth place, Phoenix in ninth place, and Seattle in 10th place, all of which are “dependable stalwarts … with solid performance metrics that are tried and true, yet that still retain a number of options for expansion and new entrants,” according to the report.

The study also reveals all but Silicon Valley have sizable incentives for data centers to build in their regions. Portland and Northern Virginia check all the boxes on the Cushman and Wakefield list of data center benefits, except for one: lower land costs.

Related:Data Center Site Selection: Why Colos and Hyperscalers Are Boosting Their Presence in Spain

Industry estimates vary between $1 million and $3 million as the cost per acre for data center-zoned land in Loudoun County, Va., which houses “Data Center Alley,” the highest density of data centers in the world.

Beyond the U.S.: Top Markets Across the Globe

Looking beyond the U.S., Singapore ranked third and Hong Kong fourth in the top ten overall rankings. According to the report, “[b]oth rank high despite a lack of available developable land” and “both have strong ecosystems, excellent connectivity, consistent demand, and all major cloud services available and expanding where possible.”

Additionally, Singapore lifted its development moratorium in 2022, establishing new guidelines to foster responsible development and encourage sustainable practices. Hong Kong, for its part, remains a financial hub with business-friendly policies.

While the FLAP-D (Frankfurt, London, Amsterdam, Paris, Dublin) data center markets continue to be mainstays in Cushman & Wakefield’s European region list, other smaller markets have managed to break in, such as Zurich, Madrid, Stockholm, Oslo, and Berlin.

What makes markets in Asia and Europe stand out from their U.S. counterparts include generous tax incentives, political stability, a stronger focus on sustainability, and reduced environmental risk. A lot of countries in Europe, for instance, have committed to fully renewable energy and offer incentives not only in terms of taxes but also for using renewables.

Meanwhile, certain cities could be relatively safe from natural disasters:

Political stability, in particular, is a crucial consideration for data center firms, one that’s offered by European data center markets in Amsterdam, Zurich, Dublin, Stockholm, and Oslo. The report states that “[a]s data centers are considered mission critical to keep applications, networks, and thus entire companies operating at their highest efficiency, the greater political situation of the data center location factors into any decision-making.”