Companies Are So Desperate For Data Centers They're Leasing Them Before They're Even Built (sherwood.news) 23
Data center construction levels are at an all-time high. And more than ever, companies that need them have already called dibs. From a report: In the first quarter of 2024, what amounts to about half of the existing supply of data center megawattage in the US is under construction, according to real estate services firm CBRE. And 84% of that is already leased. Typically that rate had been about 50% the last few years -- already notably higher than other real estate classes. "I'm astonished and impressed by the demand for facilities yet to be fully constructed," CBRE Data Center Research Director Gordon Dolven told Sherwood.
That advanced interest means that despite the huge amount of construction, there's still going to be a shortage of data centers to meet demand. In other words, data center vacancy rates are staying low and rents high. Nationwide the vacancy rates are near record lows of 3.7% and average asking rent for data centers was up 19% year over year, according to CBRE. It was up 42% in Northern Virginia, where many data centers are located. These sorts of price jumps are "unprecedented" compared with other types of real estate. For comparison, rents for industrial and logistics real estate, another hot asset class used in e-commerce, is expected to go up 8% this year.
That advanced interest means that despite the huge amount of construction, there's still going to be a shortage of data centers to meet demand. In other words, data center vacancy rates are staying low and rents high. Nationwide the vacancy rates are near record lows of 3.7% and average asking rent for data centers was up 19% year over year, according to CBRE. It was up 42% in Northern Virginia, where many data centers are located. These sorts of price jumps are "unprecedented" compared with other types of real estate. For comparison, rents for industrial and logistics real estate, another hot asset class used in e-commerce, is expected to go up 8% this year.
hype and more hype (Score:4, Interesting)
sigh, these investments are planned years ahead of time and virtual services are not geolimited. These articles always say the same thing, panic over nothing in order to drive sales talk at meetings. The vacancies rates are always relatively low because no one builds capacity to just sit there.
just like all the hype about how fair reddit mods are
Re: hype and more hype (Score:3)
Just because you step into the queue doesn't mean that you'll lease.
Some companies may just queue on multiple sites and then bail out when they found something.
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IBM (Score:4, Interesting)
Well in the NE US, there are quite a few data centers abandoned by IBM. I heard a large one in Littleton MA is sitting empty. Nevermind the ones in Upstate NY.
I guess these companies are not that desperate since these are still empty.
Re: IBM (Score:5, Interesting)
Given the vintage, the datacenters may not be desirable. Typical demands have changed.
Facility power, cooling, and supported weight per square foot are all significantly higher than they used to be. Particularly that structural support can be a pain to try to upgrade.
Also, they may be very sensitive to energy prices in a region.
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Weight: that's why I always preferred top down power, cooling and net, racks sitting on a slab instead of the false floor data center, when I could get them.
When you tell the data center shipping guys how much your incoming rack weighs and they turn pale, you got issues.
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Extra fun when someone decides to have a datacenter on an upper floor...
Oh and the fun of shipping and receiving of racks that are taller than a lot of places bothered to build the doors. Or when the freight company rolls a fully loaded rack onto a crappy lift gate and it fails in a very expensive fashion.
I'm glad that raised floor has largely gone out of fashion, particularly the practice of doing all that cabling in what is also a plenum. But mostly the bending down to reach under the floor to do stuff.
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I never encountered the short-door problem but I did have a Netapp take a plunge to asphalt off a truck at the loading dock and a different rack of servers shipped by FedEx look like they dragged the rack across the state at 90 mph dragged by chains. The data center manager called me when it arrived and told me, "I need you to say the words, 'I do not accept the shipment'" and promised to send pictures after he dealt with the shippers. Thank god he was there because the whole rack was trashed and it turne
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Re:IBM (Score:4, Interesting)
I heard a large one in Littleton MA is sitting empty.
Electricity in Massachusetts is 24 cents. That's as bad as Europe.
76% is from fossil fuels, which is terrible for a company's green credentials.
Modern racks are dense and shed much more heat per sqft than in the olden days. Old facilities weren't designed with efficient ventilation and cabling.
Labor costs are also higher in Mass than the national average.
Re:IBM (Score:4, Informative)
As a resident of California, I WISH I could get 24 cents a a KwH. I'm at $0.47 to $0.56. I imagine DCs get better rates but yeah, what a dream $0.24 would be.
How much for ad data storge (Score:3)
How can it be more then noise? (Score:3)
I can't see how the trend continues.
Any given small slice of the economy can certainly become disjointed from the macro trend for a time, right now LLMs and ML are burning tons of compute resources and industry is having to scale to support it; but once they do its hard to see the trend doing anything other than leveling off again.
Compute isn't a final product its a process tool, you can't eat it, you can't live under it, its not entertaining. Even to the extent something like video game uses compute, its the art work, and the algorithms to animate and play out the game that is the real product the compute used to execute it is just a means to an end. The amount to compute used can't really grow in excess of GDP except by cannibalizing other areas of the economy (reduced labor, replacing mechanical processes with electronic ones etc).
Compute is getting constantly more dense; you can do more in less space.
GDP growth is slowing, and projected to remain lower than in times past.
Just like thru the 80s and 90s we saw explosive growth, as office automation, CNC manufacturing, electronic communications, etc transformed the market, and then hit the wall around 2001 when everyone figured out we'd mostly found the limits of what technology enabled, sure it got faster, more polished, the cat videos became higher res, but until a new wave of miniaturization came long the .com boom was over.
Well its boom time again and it will last for some stretch of time until the obvious applications for server-side LLMs and other ML are mostly exploited. What all that looks like and how precisely long it will last I am not going to guess. However there are limits, and the probably will be found in the coming decade. The IT market will stall again until some growth in efficiencies enables GTP5 competitive tech outside expensive climate controlled spaces on specialized hardware.
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Rinse and repeat (Score:1)
But web traffic eventually grew to use up most that excess. It just happened after the investors got screwed due to bankruptcies (and picked up by other co's during fire-sales).
Same with the railroad boom of the late 1800's: overbuilt, bubble popped, investors got bleeped, but the rails eventually ended up being used as the population of the US gradually increased.
Thus, AI will
South loop chicago (Score:3)
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This isn't new! (Score:4, Interesting)
This isn't new, or even weird.
Almost thirty years ago I worked for a leasing company. We leased computers and equipment, not buildings, but the two things went hand in hand. Our customers would say they had a new office going in, we'd line them up for all the gear they needed.
And guess what? We'd have the vendors in there months before the place was even complete so they could install the phone system, or pre-stage cubicles, or get the switches installed.
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And a year later take all your equipment back when the companies went under. :-)
I was likely one of your startup customers.
Old news (Score:2)
Microsoft and Amazon have been doing this for YEARS.
They have scouts that look for buildings all over the US that they can buy and then gut, transforming it into a data center. There are lots of these kinds of "stealth data centers" all over, in every city and in lots of small towns. Innocuous little buildings with no obvious signage or name anywhere, but with suspiciously secure entrances.
Some are way out in the country at the end of a long dirt road, but again, no signage indicating anything.
They've been