The Metro region will continue to grow as a market for data centers as the pandemic increases demand for data use and storage.
The Portland/Hillsboro area has the second-highest growth rate for data center development in North America, according to a report by real estate services and investment firm CBRE Group.
Data centers are one bright spot in the commercial real estate market. They have been one of the sectors least affected by the coronavirus pandemic-driven recession.
Investors have piled into the asset class, highlighting their growing role as economic drivers. The stock price of data center REITs — investment vehicles that own, operate and finance properties — is up 25% year-to-date. The next highest-performing real estate asset class is industrial, which is up 4% to 5% year-to-date.
This compares to the stock prices of other real estate REITs, such as hotels and resorts, which have fallen around 50% because of the disruption to the hospitality sector caused by the pandemic.
Foreign investors accounted for roughly half of transaction volumes in data center REITs, indicating the global capital interest in the North American data center market, according to the CBRE Group report.
The Portland/Hillsboro market is still small compared with other regional markets in the U.S. Northern Virginia is the biggest data center market, with an inventory of 1,276 MW.
But Portland/Hillsboro is growing in popularity because of its cheap power and tax incentives. On top of 63.4 MW of existing inventory, the market has 18 MW under construction. This new construction, which accounts for 28% of its existing inventory, makes it one of the fastest-growing markets in the U.S. and Canada.
Hillsboro provides an attractive property tax abatement program and low-cost renewable energy utility programs, which have turned it into a beeline for companies searching for places to offset their data costs.
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The development of data centers in Hillsboro is controversial because of the generous tax incentives they are given to providers despite the fact they employ relatively few people.
But growth is expected to continue to meet growing demand for data due to the increase in remote working and content streaming, which have accelerated during the pandemic.
Businesses can save 25% in operating expenses by relocating their data center use to Hillsboro from Silicon Valley, says Pat Lynch, senior managing director of CBRE’s data center solutions group. “Clients are distributing their data center requirements to less expensive markets like Hillsboro,” he says.
The Portland/Hillsboro market is also ideally located close to subsea cables that connect to the Asia-Pacific region.
Data center projects in the Portland/Hillsboro market include Digital Realty’s construction of 12 MW. NTT Global Data Centers is building 6 MW. QTS, which built 3 MW in the first half of 2020, plans an extra 21 MW of capacity in the coming years, according to CBRE.
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