For this report, we looked at the backbone of our rapidly growing digital economy — data centers. As the web of devices embedded in our lives and in our economy continues to expand, so does the need to manage the unprecedented flux of information we generate. Consequently, more and more data center space is needed — and digital infrastructure assets have become a hot investment. With that in mind, we wanted to see how U.S. markets had fared during the last decade in terms of data center space. Specifically, our analysis looked at CommercialEdge data center sales and development data from 2012 through 2021 in 90 markets across the U.S. to answer the following:
In broad terms, the data we reviewed showed an estimated growth of 33.4% in new data center space across all of the markets we surveyed during the designated timeframe. More precisely, roughly 40.5 million square feet of new data center space was added from 2012 through 2021. This increased totals from 121.5 million square feet in 2012 to 162 million at the close of 2021. Furthermore, the sales data we looked at revealed that roughly 37 million square feet of data center space had changed hands during that same period for a grand total of about $7.5 billion in sales across all locations we considered for this report.
Visit the methodology section for more details on our analysis and read on for a detailed breakdown of the markets that stood out.
Executive Summary:
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- Top 20 data center sales of the last decade: Northern Virginia & Philadelphia assets claim top prices
- Top 20 markets by sales volume: Phoenix & Atlanta among most attractive markets for investment
- Top 20 markets by data center space added: Columbus, Salt Lake City among top 5
- Top 20 largest data center markets at the close of the decade: Washington, D.C.; DFW & Chicago lead
Top 20 Data Center Sales of the Decade
Washington, D.C.’s Quantum Park was the star digital infrastructure asset of the last 10 years. The office and data center property changed hands several times from 2012 through 2021. The most recent transaction was recorded in June of last year, when Landmark Dividend (itself acquired by Digital Bridge) paid $301 million for the Ashburn, Va., office and data center property. This marked not only the highest price tag that Quantum Park had commanded, but also the largest data center deal of the decade beginning in 2012. Notably, Quantum Park has been leased to Verizon since 2016. The telecommunications giant reportedly signed an 11-year lease through 2027 as part of a sale-leaseback deal that also included two multi-year renewal options.
Quantum Park had previously changed hands in 2016, when AGC Equity Partners paid $193 million for the campus — a deal that landed third in our ranking of top data center sales of the decade.
Back east, Philadelphia was home to the second-largest data center deal of the decade. Historically known as the Terminal Commerce Building, the data and colocation center at 401 N. Broad St. in Center City Philadelphia last traded hands in 2014, when Netrality Data Centers paid an estimated $200 million for the property. Interestingly, the massive asset has its own zip code; occupies an entire city block; and is one of the most fiber-dense, network-neutral facilities on the East Coast.
Originally constructed in the 1930s, the Terminal Commerce Building was designed to be virtually indestructible: The massive building’s steel framing required more than seven tons of steel, and the structure employed steel girders of then-unprecedented size in its second and third floor levels. In fact, it was reportedly tough enough that military tanks were assembled here during World War II. Equally impressively, the basement level housed a freight rail station with three 500-foot-long loading platforms, as well as a railyard with five stub tracks that could store 60 railcars.
| Market | Property | Sale Price | Sale Date | Buyer |
|---|---|---|---|---|
| Washington, D.C. | Quantum Park | $301M | 2021 | DigitalBridge |
| Philadelphia | 401 North Broad Street | $200M | 2014 | Netrality Data Centers |
| Washington, D.C. | Quantum Park | $193M | 2016 | AGC Equity Partners |
| San Diego | 7337 Trade Street | $169M | 2017 | Mapletree US Management |
| Atlanta | 200 Peachtree | $145M | 2012 | Carter |
| Bay Area | HQ@First-110 Holger Way | $138M | 2019 | Mori Trust |
| Chicago | 505 North Railroad Avenue | $138M | 2017 | Digital Realty |
| White Plains | 1 Ramland Road | $133M | 2021 | fifteenfortyseven Critical Systems Realty |
| Washington, D.C. | Quantum Park | $132M | 2015 | American Real Estate Partners |
| Kansas City | 24400 West Valley Pkwy | $125M | 2016 | JDM Partners |
| Bay Area | HQ@First-110 Holger Way | $122.3M | 2021 | KKR |
| Phoenix | 4010 North 3rd Street | $122M | 2020 | Landmark Dividend |
| Chicago | 2905 Diehl Road | $120M | 2016 | CyrusOne |
| Phoenix | 3740 South Signal Butte Road | $114M | 2013 | Apple |
| Los Angeles | 2301 West 120th Street | $110.4M | 2021 | Mapletree US Management |
| Nashville | 402 Franklin Road | $110M | 2017 | Mapletree US Management |
| Denver | 11900 East Cornell Avenue - Data Center | $97M | 2020 | Mapletree US Management |
| Atlanta | 375 Riverside Pkwy | $92M | 2020 | Mapletree US Management |
| Denver | 11900 East Cornell Avenue - Data Center | $91M | 2012 | Digital Realty |
| Washington, D.C. | 43915 Devin Shafron Drive | $88M | 2021 | Starwood Capital Group |
Top 20 Markets by Sales Volume: Phoenix & Atlanta Join D.C. in Top 5
Data center sales that closed between 2012 and 2021 across the top 20 markets for investment made up a combined total of nearly $6.5 billion. Roughly 29 million square feet of data center and colocation space changed hands in these transactions.
In particular, sales activity in the Washington, D.C. market alone accounted for about 22% of the space traded across the top 20 most attractive markets. The transactions we analyzed in the country’s largest digital infrastructure hub added up to $1.4 billion in the period analyzed and placed D.C. first on our list of the decade’s most attractive destinations for data center real estate investment.
Across the country, the Bay Area followed in second place with a 10-year sales total of nearly $667 million. Deals closed here during the decade we reviewed involved roughly 1.6 million square feet of data center space. Consequently, the estimated average sale price would add up to around $405 per square foot — nearly double the estimated average price per square foot in Washington, D.C.
In the Midwest, Chicago ranked third in terms of total 10-year sales volume. Data center deals closed here from 2012 through 2021 added up to almost $600 million and traded a little more than 3 million square feet of data center space. It’s worth noting that the Midwestern U.S. region has shown several data center-friendly features, such as: space to build; an expanding high-quality fiber connections network; lower operational costs; a temperate climate that’s conducive to free cooling for much of the year; a growing renewable energy portfolio; and lower risk of large-scale disasters, such as earthquakes, hurricanes, and fires. In addition to these advantages, the Chicagoland market has also benefitted from state-wide incentives strategies, such as the exemption from sales taxes for equipment used in qualified data centers.
Next, Atlanta was the fourth-most attractive data center investment destination of the decade. Sales here came to a total of nearly $509 million and encompassed 2 million square feet of data center space. Atlanta was similarly well-placed to meet the national increase in demand for data center space: Georgia’s sales and use tax exemption for data centers is also complemented by a variety of other local advantages, including strong fiber access; a great airport and infrastructure; relatively inexpensive power; and a wealth of local talent.
Back west, Phoenix wrapped up the top five with a sales volume of $482 million amassed during the decade reviewed. Data center space traded in the market totaled 3.2 million square feet across the transactions we considered. Notably, the Arizona market has been an attractive option for investors seeking an alternative to California locations. With comparably lower development and operational costs, as well as tax incentives and a relatively lower disaster risk, Phoenix has become a data center destination in its own right for operators looking to establish a hub that serves the West Coast.
| Rank | Market | Sales Volume | SqFt Traded | No. of Deals | Est. Price/SqFt |
|---|---|---|---|---|---|
| 1 | Washington, D.C. | $1.4B | 6.4M | 27 | $224 |
| 2 | Bay Area | $667M | 1.6M | 16 | $405 |
| 3 | Chicago | $593.6M | 3.1M | 22 | $191 |
| 4 | Atlanta | $508.8M | 2M | 17 | $250 |
| 5 | Phoenix | $482.3M | 3.2M | 11 | $149 |
| 6 | Philadelphia | $345.1M | 1.8M | 6 | $196 |
| 7 | Los Angeles | $344.1M | 1M | 7 | $335 |
| 8 | New Jersey | $316M | 1.6M | 13 | $192 |
| 9 | Denver | $273.7M | 1.1M | 9 | $259 |
| 10 | San Diego | $201.5M | 632K | 3 | $319 |
| 11 | Seattle | $200.4M | 1M | 9 | $191 |
| 12 | Dallas - Fort Worth | $186.1M | 1.3M | 9 | $138 |
| 13 | Minneapolis - St. Paul | $137.3M | 811K | 8 | $169 |
| 14 | White Plains | $135.4M | 270K | 2 | $501 |
| 15 | Kansas City | $126M | 238K | 2 | $528 |
| 16 | Nashville | $121M | 413K | 2 | $293 |
| 17 | Charlotte | $114.3M | 665K | 7 | $172 |
| 18 | Oklahoma City | $111M | 319K | 2 | $348 |
| 19 | Houston | $98.5M | 283K | 4 | $348 |
| 20 | Portland | $82.1M | 782K | 4 | $105 |
Columbus, Salt Lake City Among Top 5 U.S. Data Center Markets by New Space Added
Roughly 40.5 million square feet of new data center space was added from 2012 through 2021 across the locations we surveyed. Data center space here increased from 121.5 million square feet in 2012 to 162 million at the close of 2021, which represented an estimated growth of 33.4% in 10 years.
Once again, the largest inventory increase of the decade was recorded in Washington, D.C.: Developers here delivered roughly 14.2 million square feet of new data center space between 2012 and 2021. In terms of percentage increase, this represented an uptick of nearly 128% in the D.C. data center market. To that end, northern Virginia — home to the so-called Data Center Alley — has been a powerhouse of connectivity since the very early days of the internet. And now, it’s also home to a large concentration of digital infrastructure that supports the growth and operations of some of the largest tech companies in the world, including Amazon Web Services, Microsoft, Google, and Meta.
Meanwhile, the Dallas-Fort Worth metroplex saw the second-largest inventory growth during the same time period. Construction here added 5 million square feet of new data center space to the market for a nearly 57% increase of local data center space. In particular, the thriving local industrial market; pro-business environment; dense and diverse connectivity infrastructure; and access to a rich talent pool have made Dallas an ideal location for digital infrastructure development.
Next, Columbus recorded the third-largest data center market expansion during the decade we reviewed, following an inventory increase of nearly 3 million square feet. This development push represented an increase of 146% in the market during the 10 years studied and brought it to almost 4.7 million square feet of data center space. Moreover, as demand for warehouse space and data centers compete for space in traditional markets, the Central Ohio market has continued to welcome this increased diversity in demand by drawing on its reliable power, relatively affordable land, and lower incidence of natural disasters.
Salt Lake City was home to the fourth-largest construction total among the markets we analyzed. Developers here added close to 2.6 million square feet of new data center inventory from 2012 through 2021, which marked a market expansion of 144%. As a matter of fact, Salt Lake City has been one of the most successful secondary markets to benefit from demand outstripping supply in primary cloud and collocation hubs. Here, a highly educated workforce supports a growing technology ecosystem, extensive connectivity options, comparatively low electricity and natural gas rates. Plus, renewable energy incentives surrounding solar and wind resources, as well as industry-dedicated tax exemptions, mean the Salt Lake City market has grown to be an attractive destination for both hyperscale users seeking to own and operate their own facilities, as well as data center providers that desire unconstrained and relatively affordable markets where they can accommodate future growth.
The fifth-largest data center market expansion since 2012 was recorded in Chicago. Nearly 1.9 million square feet was added to the local industrial and office space dedicated to digital infrastructure for a 25% increase in 10 years. In particular, the northwest suburbs near O’Hare International Airport have been a hot market. And, with tech giants like Microsoft, Oracle and TikTok racing to house their data infrastructure faster than it can be built, the market is expected to continue seeing significant growth. For example, Microsoft is building three new data centers in Elk Grove Village and is planning two more at the former AT&T campus in Hoffman Estates. Each project is estimated at roughly 400,000 square feet.
Omaha, Neb., was home to the sixth-largest construction total among the markets we analyzed. Developers here added close to 1.8 million square feet of new data center inventory from 2012 through 2021, which marked a 58% market expansion. Here, the growing tech sector is slated to benefit from projects recently proposed by Google, which include building its third data center in the area, as well as a Google Fiber network that would offer high-speed internet service to local residential and small business customers.
The seventh-largest data center market expansion during the decade since 2012 was recorded in Las Vegas. Nearly 1.6 million square feet was added to the local industrial and office space dedicated to digital infrastructure, which went up by 215% in 10 years. While such high-percentage increases aptly reflect intensifying interest, it’s important to note that this is more likely to reflect growth spurts in smaller markets. For instance, the data we analyzed showed that data center property in Las Vegas totaled just more than 730,000 square feet in 2012 and grew to incorporate 2.3 million square feet at the close of 2021 — 20th-largest among the markets we considered for this report.
| Rank | Market | SqFt Total 2012 | SqFt Total 2021 | SqFt Added | Inventory Growth |
|---|---|---|---|---|---|
| 1 | Washington, D.C. | 11.2M | 25.5M | 14.3M | 128% |
| 2 | Dallas - Fort Worth | 9M | 14M | 5M | 56% |
| 3 | Columbus | 1.9M | 4.6M | 2.7M | 146% |
| 4 | Salt Lake City | 1.8M | 4.4M | 2.6M | 144% |
| 5 | Chicago | 7.6M | 9.5M | 1.9M | 25% |
| 6 | Omaha | 3M | 4.8M | 1.8M | 58% |
| 7 | Las Vegas | 731K | 2.3M | 1.6M | 215% |
| 8 | Des Moines | 78K | 1.5M | 1.4M | 1829% |
| 9 | Reno | 1.2M | 2.5M | 1.3M | 107% |
| 10 | Richmond - Tidewater | 2.3M | 3.5M | 1.2M | 55% |
| 11 | San Antonio | 808K | 1.9M | 1.1M | 132% |
| 12 | Phoenix | 5.1M | 6M | 876K | 17% |
| 13 | Portland | 1.3M | 2.1M | 797K | 60% |
| 14 | Houston | 1.9M | 2.7M | 792K | 43% |
| 15 | Bay Area | 4.2M | 4.8M | 576K | 14% |
| 16 | Denver | 3.7M | 4.1M | 397K | 11% |
| 17 | New Jersey | 8.5M | 8.8M | 365K | 4% |
| 18 | Minneapolis - St. Paul | 2.5M | 2.8M | 274K | 11% |
| 19 | Nashville | 1.3M | 1.5M | 257K | 20% |
| 20 | Kansas City | 1.7M | 1.9M | 194K | 12% |
D.C., DFW & Chicago Lead Among Largest Data Center Markets
Washington, D.C. remained the largest U.S. data center market among the 90 we surveyed. At the close of 2021, the D.C. market incorporated more than 25 million square feet of data center space, which placed it comfortably in the lead in terms of existing data center space.
Dallas-Fort Worth followed in second place, with data center space here encompassing nearly 14 million square feet in 2021. With abundant talent and a development-friendly economic environment, the Texas metroplex was well-positioned to welcome the digital revolution and position itself as a vital interconnection hub for major cloud providers, top-tier technology companies, and large financial and insurance firms — and it shows no signs of slowing down. In fact, recent reporting on data center leasing activity found that Dallas data center absorption in the first half of 2022 was a record five times the annual amount.
Not far behind, our data showed Chicago to be the third-largest market at the close of 2021, with data center space amounting to roughly 9.5 million square feet. Here, a looming shortage of land conducive to data center development has begun to put pressure on the logistics and warehousing side of the local industrial market. As a result, data center developers and municipalities alike are planning ahead and thinking outside the box so as not to stunt the continued growth of the data center industry.
New Jersey followed closely in fourth place with its nearly 9 million square feet of data center space. According to recent reports by CBRE, the New York-New Jersey tri-state region ranked among the top markets by data center leasing activity during the first half of 2022. Notably, the financial services sector has been a major driver of demand in the market and pushed net absorption to 16.0 megawatts (MW), a significantly rapid increase from the 6.0 MW of net absorption recorded in the first half of 2021, as well as the 3.0 MW recorded during all of 2020.
Atlanta rounded out the top five with a total of 7.2 million square feet of property dedicated primarily to data center use. Building on its tech talent and connectivity infrastructure advantages, Georgia was among the more ambitious to become leading destinations for the industry by heavily supporting data center development: The state recently extended its hyperscale-dedicated tax incentive policy. It was originally intended to sunset in 2028, but will now continue through 2031.
Use the interactive map below for 2021 data center space totals in the 20 largest markets.
The continued growth of high-end cloud computing, increased spending on green data center technologies, and the rise of network upgrades to support technologies like 5G are likely to keep demand strong — and developers struggling to keep up. Plus, as hyperscale data center development begins to challenge the traditional enterprise model, the only constraints in terms of how much a data center market can grow seems to be limited to development possibilities within the local geography; the reliance of local utility power and water availability; and the challenges that come with changes in the regional climate.
Methodology
For this report, we turned to CommercialEdge research on digital infrastructure assets. Specifically, we looked at industrial and office properties that were at least 25,000 square feet in size and were determined by CommercialEdge to be primarily used as data centers. The data we reviewed spanned 90 U.S. markets and referred to properties that were completed as of December 31, 2021.
For our data center market expansion ranking, we considered data center primary use properties that were completed during the 10 years between January 1, 2012, and December 31, 2021.
Sales and ownership information included in this report pertains to transactions closed between the same timeframe. While it does not include portfolio deals, it does include individual properties that were acquired as part of larger portfolios, if information on individual property purchase price was available. Sale price per square foot values were estimated and may not accurately reflect the situation in each individual market.
Disclaimer
While every effort was made to ensure the accuracy of the information presented herein, the information is provided “as is” and neither 42Floors nor CommercialEdge can guarantee that the information provided is complete. This report is for general informational purposes only. It does not constitute and should not be relied upon as a basis for any investment decision. The information presented is subject to change without notice and may or may not apply depending on the circumstances. Always contact a qualified investment consultant if you need advice regarding buying, selling or otherwise transacting in any investment.
