Toronto Is North America’s Second Most Active Market for Data Centre Leasing
March 31, 2021
Activity fueled by rampant demand for could services due to remote work and businesses prioritizing digital infrastructure
Demand from cloud service providers and large tech companies had Toronto log the second-most data centre leasing activity in North America in 2020, according to CBRE’s latest North American Data Center Trends Report.
Toronto, which saw 38.1 megawatts (MW) of data centre absorption in 2020, was bested only by Northern Virginia, which recorded a whopping 217.2 MW of absorption last year. Montreal was ninth on the list, with 11.0 MW of net absorption in 2020, better than Seattle, which had 6.9 MW absorbed.
“Data centres have proven to be the asset class least affected by the pandemic and resulting recession due to their non-cyclical nature and the critical role they play both in business and real estate,” says CBRE’s Montreal-based Senior Vice President David Cervantes, who co-leads the company’s Canadian data centre business. “Data centres support nearly every sector of the economy and their importance and our reliance on them will only increase as remote working continues.”
Top North American Data Centre Markets
Canada has 279 data centres and ranks fifth globally for data centre density. Data centre markets, namely Toronto and Montreal, benefit from demand in prime locations and exceptional growth from global cloud providers. Montreal is a top destination due to its cold climate and affordable power rates. Toronto, by virtue of its size and status as a home to large enterprise, is also seeing unprecedented levels of growth, with large amounts of capital ready to be deployed.
Data centres, one of the fastest-growing real estate sectors pre-pandemic, remained strong in 2020 as businesses reconfigured their digital infrastructure to improve their remote work capabilities, and tech giants and cloud service providers raced to meet consumer and corporate demand, according to CBRE.
“With data usage growing at an explosive rate, we expect data center demand to increase across both primary and secondary markets in 2021,” said Pat Lynch, Senior Managing Director, Data Center Solutions, CBRE. “To capitalize on this growth, data centre providers will look to deliver network and interconnection offerings to better connect business-critical applications, as well as to meet anticipated demand for evolving technologies like 5G, Edge computing and the internet of things—all of which will further fuel the data center real estate market.”
There has been strong investor demand in data centres and an uptick in investor interest in direct investment in the sector due to the strong performance of data centre REITs. The markets with the most data centre space under development include Northern Virginia (283.5 MW), Montreal (57 MW), Silicon Valley (50.1 MW), Central Washington (43.7 MW) and Chicago (33.7 MW).
Data centres are non-cyclical by nature, so, as was the case during the Global Financial Crisis of 2008, there has been a flight to data centres by the major institutional investors in the wake of COVID. “The secret is out and institutions of all types are investing in this space and projects are becoming very large,” says CBRE’s Toronto-based Vice President Scott Harper, who co-leads the company’s Canadian data centre business. “Right now this space is a safe place for capital to camp.”
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