From the California gold rush in the late 1840s to the Texas black gold rush in the early 1900s, boom towns have been a constant throughout the history of the United States, serving as a great indicator of rapid growth into unchartered territory. In recent years, the data center market has seen unprecedented growth in several markets across the country, and Dallas has been a shining star in the middle of it.
The Dallas data center market is the second largest in the country with 545 megawatts (MW) of total inventory—a megawatt is a large unit that measures total provisioned power as opposed to power capacity. Historically, 1 MW of power has typically equated to 10,000 square feet of data center space. Originally growing out of the Infomart and Digital Realty’s Richardson campus, the Dallas data center market is unique in its diversity with enterprise users across a variety of sectors. Comparatively, the Santa Clara, California, market is mostly technology users while the Northern Virginia market (the largest market in the United States) is mainly cloud service providers. From financial services to healthcare to technology users, there is no typical data center requirement in Dallas. In the past, the one thing the Dallas market lacked was the hyperscale user (very large consumers of data center space, like a cloud service provider or a social media company) activity that other large markets, like Northern Virginia or Chicago, have seen. However, in 2022, that has completely changed.
Large requirements, which are typically 20+ MW, from hyperscalers have inundated the market. Historically, a solid year of total leasing activity amounted to about 40 MW. So far in 2022, the Dallas data center market has seen 210 MW of leasing activity in the first two quarters alone! Vacancy rates are at an all-time low while preleasing activity is at an all-time high. While one may think this volume of leasing activity puts the market close to its peak, our research is showing that Dallas could be hitting its next gold rush, so to speak.
Let’s drill down into why.
The Dallas data center market has some of the greatest tailwinds compared to competing markets. For starters, the food and water that data centers need to thrive—power and fiber connectivity—are abundant and inexpensive across the metro.
Data centers use a tremendous amount of power. For example, a large data center (100 MW) uses the same amount of power as nearly 80,000 households. In Dallas, power can be up to 50% cheaper than other competitive markets and can be delivered significantly quicker as well. This is more meaningful than ever as Dallas’ competitors are facing power challenges where large power deliveries to new data center sites may be delayed until 2026 or even 2029.
From a fiber perspective, Dallas is one of the richest areas in the country for connectivity and home to one of the most interconnected buildings in the world: the Infomart (yes – the large, mirrored building across from Medieval Times is one of the most important buildings in the United States for internet and telephone communication).
Land is also available and inexpensive compared to other markets. There are still pockets around the metro where finding large quantities of land is easier to accomplish than other competitive data center markets and at about 10% of the cost.
Lastly, Dallas has a business climate that has been welcoming to data centers. Dallas and the surrounding cities have seen data centers as favorable developments as they understand the benefits to our communities and school districts that these buildings bring.
These key factors, coupled with the strong market tailwinds, bode strongly for local data center demand in the years to come. Just as people poured into Texas in the early 1900s looking to strike oil, we could be witnessing the next lucky strike as data center operators, developers and users alike pour into the Dallas area to leverage all that Dallas has to offer.
