North Texas has surpassed Silicon Valley as the more desirable region for data centers.
Despite the capacity concerns of Texas’ energy grid after the freeze in February 2021, Dallas-Fort Worth’s data center inventory has grown by 247% since 2015 and is now ranked second among primary markets.
The region offered 390 megawatts of data center inventory in the second half of 2022, which was up 23 megawatts since 2021, per AXIOS Dallas. The CBRE report states that rental rates in North Texas were $120 to $160 per month for 250 to 500 kilowatts, while in Silicon Valley, rental rates ranged from $155 to $250 for the same 250 to 500 kilowatts of inventory per the CBRE.
The increase in the popularity of Dallas is largely due to the significant increase in demand for data centers, as more businesses are seeking secure and off-site facilities to store their data. Power restraints in places like Silicon Valley and Northern Virginia have forced operators to seek markets with more capacity.
The shift in preference toward North Texas is not surprising, given the region’s competitive advantage in terms of increased capacity and lower rental rates. Additionally, the CBRE report states that “construction activity continues to skyrocket” in the Dallas-Fort Worth Metroplex.
Although construction has continued to rise in Dallas, development has been unable to keep up with demand. This has prompted developers to look for opportunities in South Dallas. The CBRE says that South Dallas has become a new submarket that may interest data center developers, and leasing has continued in South Dallas. Several new operators have now signed leases.
The new data centers might impact hiring in the future.
“There are economic headwinds that may impact tech talent hiring in the year ahead. Announced layoffs and hiring slowdowns and freezes by tech employers may, if sustained, loosen the tight labor market for tech talent,” the report states. “Employers generally have been reluctant to significantly reduce their tech talent teams, which often take years to build, and instead have confined layoffs to sales and administrative staff when necessary.”
Despite North Texas’ emergence as a top region for data centers, Northern Virginia remains the world’s top market for data centers.