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Data centers are enjoying the biggest price increases of all commercial assets in 2023, according to CBRE’s latest North American Data Center Trend Report. The report reveals that North American data center pricing reached near record levels in 2023, driven by strong demand and power constraints limiting new capacity.

National average asking prices rose to $163.44 per kW/month from $137.86 per kW/month, marking an 18.6% year-over-year increase. This growth is expected to continue into 2024, with double-digit growth projected. Additionally, supply in the eight primary U.S. data center markets increased by 26% in 2023, totaling 5,174.1 megawatts (MW), while vacancy rates remained near record lows at 3.7%.

“The U.S. data center market experienced the largest pricing increase among all commercial real estate assets last year, demonstrating its resilience and the impact of high demand for available power,” said Pat Lynch, executive managing director for CBRE’s Data Centers Solutions. “As the economy becomes more digital and artificial intelligence expands into new sectors, demand is expected to remain strong. Operators and developers are prioritizing technologically advanced spaces to meet this demand.”

Construction in the data center sector also reached new highs in the second half of 2023, with 3,077.8 MW under construction in primary markets, a 46% increase from the previous year. With AI driving demand across major markets and project delays persisting, securing space early is essential. Currently, 83% of under construction supply is already pre-leased.

While supply chain disruptions have improved, construction costs are rising due to ongoing shortages in critical materials like generators, chillers, and transformers. This trend is expected to continue throughout the year. Power constraints are also creating opportunities for emerging data center markets in Nevada, Indiana, and Wisconsin to host large facilities.

Among the top data center markets, Northern Virginia remained the most active in the second half of 2023, with significant construction and rising prices. Phoenix led in average asking rates, while Atlanta and Dallas/Fort Worth also reported strong activity and pre-leasing.

Looking ahead to 2024, Gordon Dolven, director of Americas Data Center Research at CBRE, noted several trends influencing the U.S. data center market, including the emergence of new development markets, advancements in renewable energy, and the impact of artificial intelligence on site selection. With demand remaining robust, the data center sector is poised for continued growth in the coming year.