Austin, San Antonio Nearly Out of Data Center Space

To any Austin techies looking to lease space at a data center: good luck.

The vacancy rate in Austin and San Antonio data centers reached just 1.7 percent in the first half of the year according to a report from CBRE. That marks a full year of less than 2 percent availability, though it is slightly up from 1.3 percent vacancy one year ago. Still, 1.7 percent vacancy puts the Austin-San Antonio market at the second-lowest availability in the country.

Some 88 megawatts of capacity are under construction, more than half of the 162.2 megawatts of total inventory in the Austin-San Antonio data center market. In all, the area’s tenants absorbed 6.7 megawatts of space in the first half of the year.

“Within the Texas Triangle, Austin has emerged as one of North America’s fastest-growing data center markets,” the report’s authors wrote.

While Austin-San Antonio leads major Texan markets in terms of low vacancy, Dallas-Fort Worth was no slouch. The metroplex’s data center inventory is about 500 megawatts, with just 4.1 percent available. As inventory grew 124 megawatts in the last year, DFW’s vacancy rate fell by almost 3 percent.

DFW has been on a data center building spree, with inventory rising by 50 percent since 2020.

In Houston, where industrial projects are typically more focused on heavy industry, the data center market is far less constrained. The city has 134 megawatts of inventory and a 24 percent vacancy rate. While that’s down 4.4 percent on the year, it’s still far higher than its Texas Triangle counterparts.

As investors have soured on many multifamily projects, data centers have stayed hot with low vacancy rates and continued rent growth. Bidding wars are still happening for suitable development sites, and while transactions are slower, some high profile sales have still happened. Notably, Digital Realty sold a Texas data center for $150 million — its address couldn’t be determined.

The recent explosion of interest in artificial intelligence presents opportunities for data center developers, as the large-language models that power tech like Chat GPT require huge data transfers. Projects with high-bandwidth and fiber connections are particularly popular for AI tenants.