Data center absorption in the Dallas-Fort Worth (DFW) market in Texas reached record levels in 2023 according to a new report, which says rocketing demand for cloud, AI, and machine learning services has driven rapid growth.

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Compass is one of many companies developing new data centers in the Dallas-Forth Worth region – Compass Datacenters

The region reported absorption of 386MW in 2023, according to Cushman & Wakefield’s 2023 Dallas-Fort Worth Data Center Report, representing a seven-fold increase compared to 2020.

Growing data center demand in DFW

The newly published report shows that DFW, the second most popular data center market in North America, had 663.9MW of data center space at the end of 2023, spread over 4.5 million sq ft (418,000 sqm).

However, vacancy rates are at an all-time low of 3.73 percent, with only 24.73MW of turnkey space available.

“Despite a robust construction pipeline – 1.4 million sq ft that can provide 225MW – the vast majority of the market’s new data center supply for 2024 and 2025 has been pre-leased,” the report said. “Cloud providers securing large campuses through pre-leasing and AI/ML companies leasing the market’s few remaining pockets of available space are the primary drivers of DFW’s record demand.”

Ali Greenwood, Cushman & Wakefield executive director, described data centers as “the backbone of our economy and daily lives, from cloud computing that supports remote work and collaboration to ever-present mobile devices and social media.”

Greenwood said: “With continued, strong growth on the horizon, the DFW market will continue to be a leader in the data center sector but not without challenges, especially around utility constraints.”

Average power rates at year-end were $0.06 per KWh, while average wholesale rental rates were $110 kW+E, the report said.

Hyperscalers grow their presence in Dallas

Indeed, the DFW market has proved popular with data center operators including the cloud hyperscalers.

In September, DCD reported that Google is set to build a second Texas campus in the Red Oak area of Dallas. The company is investing an initial $330 million in the project, with plans for the data center’s final cost rising to over $600 million over multiple years. It is likely to take two years to build and will be around 285,000 sq ft in size.

The tech giant already has a data center in the Midlothian area of DFW, which it opened in 2019.

Another data center business, Compass, is also building out capacity of up to 350MW at Red Oak.

Meanwhile, AWS is scheduled to complete a much smaller 30,000 sq ft (2,790 sq m) data center at De Soto, on the outskirts of Dallas, later this year.

Bo Bond, Cushman & Wakefield executive managing director, added: “Even though permitting and development is a complex process, with the demand locally and globally, we can’t build data centers fast enough. Dallas-Fort Worth will capture more than its share of that investment.”