More Hyperscale Demand On The Way For Dallas Data Center Market

Update, March 22, 2 P.M. CT: CBRE provided additional data regarding enterprise vs. cloud absorption and the potential hyperscale demand in 2018 and 2019.

More hyperscale users are on their way to the Dallas-Fort Worth data center market in 2018 and 2019 (10 MW to 30 MW of extra demand estimated), according to CBRE's Data Center Solutions team. Excellent fundamentals, room to build, prime geography and low costs of electricity/development put DFW on shortlists for developers and investors everywhere.

“We hear about this all the time, [when] a client is on a search for data center space, and they don’t know exactly where they want to be, they don’t have to be in Northern Virginia for instance, Dallas is 95% of the time on that list,” CBRE Senior Vice President of Data Center Solutions Brant Bernet said.

Historically, DFW has been primarily an enterprise market (80% enterprise and 20% cloud as a colocation market), and the lion’s share of DFW’s excellent absorption numbers comes from enterprise users, which typically are smaller than hyperscale players. That makes its placement among the nation's data center markets an impressive feat — DFW has the third most absorption in the nation behind Northern Virginia and Silicon Valley whose absorption numbers get boosts from hyperscale users, according to CBRE’s data center team.

DFW is getting its own significant hyperscale players in the market, such as Facebook, that do not register in the data because they are privately held. Facebook’s Fort Worth data center has almost 100 megawatt of load in play already and is supposed to double. DFW’s total inventory, not including users like Facebook that own their space, is 252 MW, the second-largest in the nation, and 40 MW was in the pipeline at the end of 2017, according to CBRE research.

“I think the same fundamentals that brought Facebook here will attract companies like AWS and Microsoft (aka hyperscale users) when the timing is right,” CBRE Associate, Data Center Solutions, Haynes Strader said. “Every co-location provider is positioning themselves to be able to accommodate a large cloud provider when the time is right.”

“Our prediction is that 2018, and certainly 2019, we’ll see more of those types of clients, the real hyperscale guys, find their way to Dallas,” Bernet said.

Nationally, capital has cast a friendly eye upon the asset class, moving to position more of its weight behind data center space. CBRE’s data center team said investment in the asset class totaled $20B in 2017, more than the total investments in data centers of 2015 and 2016 combined, and that the trend will only continue as investors seek to diversify their portfolios.

“There’s significant interest in investing in the space because there’s perceived thought that data centers are continuing to become a more and more valuable asset as we consume more and more data,” Strader said. 

“You’ve got all these investors that are looking at their portfolio and their constituents are saying, ‘we need to diversify,’ and everybody has kind of come to the conclusion that that means medical office building or data centers, and data centers have big rent numbers; sales numbers are big, and it’s becoming more of a norm from an investment strategy [perspective],” Bernet said.

According to the experts, Dallas is poised to soak up a lot of that strong demand heading into 2018 and 2019. 

“The kind of absorption we do without having these major cloud requirements is telling of the nature of the market still being attractive to [hyperscale users],” Strader said.

To hear more about the state of the Dallas-Fort Worth Data Center Market, check out Bisnow's Data Center Investment Conference & Expo South on June 26.