JLL Finds Data Center Developers Interested in SoCal Suburbs

Southern California developers see a ripe opportunity in building data centers, with a vacancy rate in the Los Angeles market at 4 percent in the first half of the year, according to a JLL report.

While greater Los Angeles has lagged behind other metro markets in data center construction due to high land costs, developers are looking at locations outside the city’s core for new projects, Bisnow reported.

Because of a rising demand for data storage and improved local regulations, cities such as Vernon, Monterey Park and El Segundo have become attractive to data center builders.

“We’re seeing a lot of cities being more open to data centers when they traditionally weren’t because they were focused on office or industrial,” Darren Eades, managing director of JLL, told Bisnow.

“As the dynamics change, these cities need to be more open to data center development because it may be the highest and best use at the time, and also the biggest value creation for the city.”

One of the key factors driving this demand is the region’s connectivity to Asia via undersea fiber optic cables, making it an ideal spot for data centers.

The scarcity of suitable sites and power availability, however, has hindered development.

The challenge of securing enough power can take years, with some projects like those in Monterey Park benefiting from recent upgrades to local power plants.

In Monterey Park, a new 218,000-square-foot data center is under development at 1977 Saturn Street, on a site once home to an office building. The project is expected to draw substantial interest because of its proximity to upgraded substations and links to reliable power sources.

The site was purchased by Revantage, a Blackstone portfolio company, signaling significant investment in the sector.

Meanwhile, in Vernon, Dallas-based Prime Data Centers has completed a 243,000-square-foot facility, which was fully leased even before construction was completed, underlining strong demand powered by a growing global demand for cloud storage and artificial intelligence applications.

A Vernon spokesperson said the city is in talks with other data center operators. In September, data center developer CoreSite bought a 7-acre site in Vernon for $61.5 million, according to Bisnow.

El Segundo, with its proximity to the underground fiber that ties the West Coast to the undersea cable to Asia, is home to three facilities from top names in the industry, including Equinix and Digital Realty.

A KPMG study this month said tech tenants are in such dire need of data centers that they’re willing to pay higher prices for power.

The need is so great, and the lack of top-notch product is so pronounced, that Eades said data centers won’t be built fast enough for years to come in L.A.

“I don’t think we’ll ever be able to catch up,” he told Bisnow. “There’s so much pent-up demand in the marketplace.”

— Dana Bartholomew