Mega-Deals by Meta, TikTok Boost Data Center Leasing in 2021

The QTS data center campus in Hillsboro, Oregon. (Photo: QTS)

Social networks had a big appetite for server space in 2021, making it another successful year for US data center developers, according to a new report from a real estate firm.

Social networks Meta (Facebook), Twitter and TikTok set the tone, tallying the 11 biggest rentals of the year. Those deals were all for 30 megawatts or more of capacity as the rapidly growing internet economy creates demand for ever-larger data centers, according to North American Data Centers’ Jim Kerrigan, who tracks the activity. wholesale leasing in the data center industry.

Kerrigan noted that in 2017 there were only 6 wholesale data center leases of at least 10 megawatts (MW) and none over 25 MW. This has changed dramatically over the past two years, with 6 wholesale leases over 40MW in 2020 and 11 contracts of 30MW or more in 2021.

“To accommodate these mega-leases, developments need to be much bigger going forward,” Kerrigan said. “The winners will be developers who build speculatively and can provide immediate plug-and-play solutions. These larger leases will drive larger investment transactions, and we could see unique properties reach over $1 billion. dollars.

Meta is both buy AND build

The data center sector’s largest tenant was Meta, which leased 283 MW in six markets, including the year’s largest lease for 80 MW in Manassas, Va., according to North American Data Centers. This massive rental goes beyond Meta’s internal construction program, as it pursues a strategy of building huge data center campuses in remote areas, while renting space to developers in the largest markets. of data centers.

Meta currently has 47 data centers under construction, the company said recently, reflecting the extraordinary scale of the continued expansion of the global digital infrastructure. This number appears to include both new construction and leased space as Meta builds capacity across its Facebook, Instagram and Messenger social networks while laying the groundwork for future metaverse apps.

“Meta’s (Facebook) multi-market rental business contributed to the success of 2021, and it will continue into 2022,” Kerrigan said.

TikTok continued its rental spree in Northern Virginia, with three large leases in Ashburn and Leesburg totaling 92 megawatts of capacity, according to the report. In 2020, the social network leased 134 megawatts of space in “Data Center Alley” in Ashburn. TikTok’s focus on Ashburn, the most connected place on the internet, likely reflects its appetite for network bandwidth to deliver its popular short videos featuring music, dance and comedy.

Other notable developments reported in the 2021 Data Center Real Estate Review:

  • Twitter was the other social network to make a splash in the rental market, cutting 48 megawatts of capacity at the new Digital Realty campus in Hillsboro, Oregon.
  • Apple was back in the market, adding 15 MW each to Ashburn and suburban Chicago.
  • It was a moderate lease year for Microsoft, which is typically one of the busiest players in the wholesale market, with only one lease on the list (12 MW at Elk Grove Village in suburban Chicago. Microsoft could digest the sip of 2020 about 225 MW rental.

Markets: Virginia still on top, but gains for Hillsboro

As usual, the most active market was Northern Virginia, with large leases in Ashburn as well as the fast-growing submarkets in Manassas and Leesburg. CloudHQ, Compass Datacenters, Aligned and Digital Realty have all landed giant leases in the region.

The booming market is Hillsboro, the suburb of Portland that is home to a growing cloud cluster. Growth in Hillsboro (forecast by the DCF in a 2020 market report) was triggered by a favorable cost environment – ​​including a leading enterprise zone and Oregon’s business-friendly tax policies – as well an ideal climate to keep servers cool.

The construction boom in Hillsboro is reflected in active rentals and pre-leases, including major deals for Digital Realty, Flexential and QTS which landed a 35 megawatt lease with Meta/Facebook. This deal could prove to be much larger over time as QTS seeks up to 250MW of power from utility PGE to support Facebook’s future growth.

As large internet companies prepare for years of growth, they seek larger campuses to provide a long-term growth track.

“Hyperscale and large enterprise users are demanding longer ramp times for space, power and land reservations,” Kerrigan said, adding that this could lead to divergent strategies where some developers are optimizing. mega-deals and incremental tenant growth, while other builders are looking to use new build to meet short-term market demand.

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