Not Your Father’s Data Center - A 2020 Year in Review on Digital Strategy Trends

Episode Date: January 7, 2021

Haynes Strader, Vice President of Data Center Solutions, CBRE, returned to Not Your Father’s Data Center for a look back and assessment of one of the craziest years in recent memory. To summarize the market during the pandemic, Strader said, “CBRE had a really busy first quarter, and then, in March, we saw a big screeching halt as everyone was trying to figure out what was happening.” There was still lots of activity, even with a slump in transactions. “We’ve seen that start to pick back up with what’s shaping to be a busy fourth quarter. I think we’re going to be rocketing into 2021 from both an enterprise standpoint and a hyper-scale standpoint.”

Welcome to Not Your Father's Data Center podcast, brought to you by Compass Data Centers. We build for what's next. Now here's your host, Raymond Hawkins. Welcome to another edition of Not Your Father's Data Center brought to you by Compass Data Centers. I'm Raymond Hawkins, your host, and today we are joined by CBRE's Vice President Haynes Strader. Haynes out of Dallas, Texas. Haynes, thank you for joining us today. Yeah, thanks for having me. This is great.

Well, this is our second edition with you. We're grateful to have you join us again here as we wrap up what may go down as the craziest year of our lifetime. Yeah, it's been one. It's been one for the books, for sure. Yeah, notwithstanding the global pandemic, I believe you welcomed a new edition. So let's focus on that for a minute if we can. That's big news for 2020. Yeah, it's been a crazy year for sure. And we've been blessed to have a little girl, Charlotte, join us here the last couple of months. And she's six weeks old now. And she's doing great. She is starting to ask about kilowatts and megawatts. Good, good, good to get her in the data center business early.

Good. Exactly. Good, good, good. But no, all that's been, it's been fun. And in a way, having, you know, being able to work from home, which would not have been the case probably without COVID, has made that a blessing in disguise in some ways. Yeah. Well, we'll tell Charlotte's stories years from now about what the year of her birth was like. But what a great blessing and congratulations to you guys for bringing her into the world and getting the joy of parenthood. It's mine are on the opposite end of the spectrum now, mine are 22 and 20. And boy, it's been a fun ride. Certainly the best job I ever had is that of dad. So excited for you guys. Good stuff, bud. Well, 2020. So, you know, we're so grateful to get to chat with you again. Look back on the year. If I had to summarize the year when we get asked in our leadership meetings about 2020, I would, my description has been, it's been really busy, lots of activity, but execution has been difficult. Actually getting done all kinds of looking, all kinds of meetings, all kinds of talking, all kinds of Zooms. But the ability to execute at our customer level has been really, really tough.

So we have an incredible looking pipeline without lots of execution. That's how it looks to us. I'd love to hear, Haynes, as you have a different view of the market and a slightly different customer set, if you had to summarize 2020 in a sentence, how would you summarize it? Yeah, I think I would summarize it as kind of a, maybe a backwards L-shaped recovery or J-shaped in a way. We had a really busy first quarter. And then in March, obviously, and busy, people were signing deals. And then March hits, and we saw a big screeching halt as everybody tried to kind of figure out what was happening. But there was lots of activity, lots of questions, lots of fires to put out, lots of things that needed to be addressed.

But agreed, there was definitely a slump in transactions. I think we've seen that start to really pick back up into what's looking like a pretty busy fourth quarter. And I think we're going to be just rocketing into 2021, both from an enterprise standpoint and a hyperscale standpoint. I think the big thing we saw out of this year was the pandemic caused everybody to take a really hard look at their digital strategy and what their digital infrastructure looks like. And I think we saw enterprises in particular really start to take action. accelerated, you know, whether it was digital transformation or it was simply improving connectivity between locations or creating, you know, a remote environment for your workforce, whatever that was, you know, we saw those plans that may have been out for three or four years crunched into three or four months. And I think we're now starting to see those to go out and execute. So I can tell you from just our team in Dallas, I don't think we've ever been busier. And we're starting to see deals get signed,

which is exciting, but a lot of activity going into next year. So Haynes, you alluded to the pandemic causing or forcing a lot of organizations to rethink their digital strategy. I heard early in the pandemic sometime about May or June, someone say, we've seen three years of digital transformation in three months. And I think that's only accelerated in the back half of the year. I think that what we've seen is two things. One, that enterprise set of customers going, hey, can we do our business this way? Can we do our business remote? Can we do our business work from home? Can we manage all of our communications online? Can the business actually remain productive? And how do we make

it remain productive, number one? And then number two, all of the cloud guys that we support who provide those services, all seeing their demand go through the roof. And I'm not going to have any of the statistics handy at my fingertips, but I know Zoom and Microsoft Teams saw exponential growth, record logins by day, record growth, record user numbers, and all of that, I think, has made the enterprise customer stop and go, okay, we thought about changing. What do we really need to do to change? And I liked your phrase.

You said we really see rocketing into 2021. We would completely agree. I mean, we have more projects and more requests and more proposals being worked in December than any month I've ever seen. Yeah, that's interesting to hear. And I think there's a lot of talk around remote working and what that's going to look like in the future. But I think what we're seeing, I think, is a more strategic play for many of our larger clients that we've talked to for a long time about transformation. And a lot of that is financial services,

healthcare and technology companies that have seen a fundamental shift in their business. And so when you look at healthcare, for example, the rise of telemedicine that this has prompted and the ability for doctors, the ability for doctors to connect with patients digitally, but also the adoption rate of customers being willing to do that has gone way, way up. And just like you're saying the same thing with e-commerce, right? Or

with food delivery, you're seeing people that normally wouldn't have been comfortable on a computer or on their phone, engaging with a service provider. Now, having been forced to do that for a year, feeling much more comfortable doing that. And so we're seeing this trend of really strategically upgrading technology to improve customer experience and improve interaction within customers. And I think that's going to drive some really cool long-term developments in this space. Yeah, I got to tell you, Haynes, personal experience, I think you nailed it. So for our listeners who don't know, Haynes and I are separated by about a generation. And so we have slightly is. When someone mails me a check, I go to the bank. I don't like, and my children are like, dad, why are these checks with a deposit slip sitting on

the counter? And I'm like, because I'm going to go to the bank this afternoon. They're like, dad, you know you can do that on your phone. And my daughter was like, look, dad, here you do. Just sign the check, take a picture of it, and you can deposit it right from your phone, and it'll take one minute. And it's things like that that I'm like, oh, well, that was handy. You know, Uber Eats has become a normal part of my life. And then, Haynes, you brought up, I'm sorry, I'm just going to be silly on this one.

I couldn't believe the Uber Eats thing. It's one of my favorite Cajun places. I'm like, I bet they're not on Uber Eats, but I'll try it. Ordered it. And literally 22 minutes after I ordered it, the guy's knocking at my door with my favorite Cajun seafood. And I'm like, why would I ever leave? This is so handy. And to your point, because I couldn't go in the store, but I wanted to support them. I went and downloaded the app and tried it for the first time. And so I'm a personal example of the adoption you're talking about. And then I got one more.

I mean, I don't know about you, Haynes, but I don't know if you've done much telemedicine with Charlotte being born this year, but holy cow, I had telemedicine visits this year. It is the greatest thing. I get a text from the nurse that says, the doctor will be with you in five minutes. Please get on and let's do your pre-check stuff. I don't have to drive anywhere. I don't have to sit in the waiting room reading Southern Living. I don't have to wait an hour for the doctor to get caught back up. They schedule me a slot. They text me five minutes before. The nurse asked me a handful of questions.

And boom, the doctor's right there. Telemedicine for me is revolution. I mean, I know there's things if you break your leg, you're going to have to go physically see the doctor. But man, that has been an incredible change. And I agree with you. What it's going to do to the back-end services is truly transformational. So I laugh at the list you made. All three of those impacted me personally. Banking, food delivery, telemedicine, all things that impacted me in the last year where I just,

I wouldn't have done it otherwise, Haynes. I wouldn't have made the deposits differently, ordered the food differently. And to your point, I just wouldn't even think about it. My doctor would call me on my phone. No, that's exactly right. And I think that if you take it a step further, so it's easy to understand that you're interacting with your breeds and you're interacting with the customer. But who else does that impact? to a restaurant, the restaurant may or may not have great technology to not only receive the order from Uber Eats and all that, but then actually process it and based on the volume of what they're processing. And you've seen companies like Chick-fil-A and McDonald's really aggressively roll out technology infrastructure to allow them to be super

efficient at doing these takeout orders. And that's why when you pop on, there's a handful of restaurants every time that are always 10 or 20 minutes away. And it's because they, they can handle massive amounts of volume. And I think we're just, again, going to see that continue to grow. We have a food facilities group at CBRE and they've never been busier because they're out trying to find a, you know, non-restaurant space for food preparation for a lot of these delivery apps. Wow. So it's just a place to prepare without walk-in, without tables. Interesting.

Exactly. Yeah. And so it's just the whole concept, it changes, you know, it goes all the way down the business chain. And I think you'll see restaurants come up with more technological, innovative, you know, solutions. And again, all of this relates back to, if you're a restaurant, most of that's probably going into the public cloud somehow. But again, all of this relates back to if you're a restaurant, most of that's probably going into the public cloud somehow. But again, that's driving hyperscale demand. And every aspect of those things has a trickle-down effect that impacts other businesses. And all of that supports the story that we're going to see greater consumption of data, greater creation of data, and we're going to need more places to process it. So I continue to think that COVID, I think you nailed it on just, you know, COVID definitely ramped things up

from a technological adoption standpoint. But I think as always, technology is growing exponentially year over year. The amount of data that we're creating is growing exponentially year over year. And I think we're starting to see that. And we can talk a little bit market to market if you want about where we're seeing that specifically now. But it's been a pretty cool instance in our business. It's been obviously a very challenging year for a lot of people. And I think that ultimately, hopefully, people are better served by a community that understands everybody better. We've all been through this shared experience. I've had to do some flying and I've never had a more pleasant experience, you know, from a customer service standpoint in my life than traveling lately.

And, you know, people are appreciative, spending dollars at the hotel or on the plane or whatever it is. And, you know, that's, I hope that we can hang on to a little bit of that as we get back to normal over the next 12 to 18 months. Well, Haynes, you raised a couple of really, I think, important things there. You know, shared experience produces connection and produces bonds, but shared suffering, I think, produces real, real deep connection and love. And I think that the world has shared in this suffering this year, I think is virtually universal. And I think produces in all of us, reminding us what's important and what's true and what's valuable in life and hope that we come out a better society on the other end of this.

That is for sure. I definitely want to do some market level conversation. I think that will be great. Can I ask a couple more real estate specific because I think your position is unique. I love the sort of the overview about how we personally have experienced and seeing the way technology is changing and what it's doing to the back end. And I couldn't agree more with your statement too, right? The pace at which the world is adding ones and zeros, the world is adding data, is only accelerating. And the way we do it and the pace at which we do it is accelerating,

which ultimately for you and I as the guys who build and represent warehouses for data, it's good for us. So completely, 100% agree with that thesis. But I'd love if you're willing to take a couple of minutes. You mentioned the food service part of the business. I'd be interested to get your take. So I went and stayed. Haynes and I are both recording here from Dallas, Texas. It's where we both live. I went and stayed in downtown Dallas this past weekend. A friend of mine had built a new hotel and wanted to go check out the new hotel. And just spending two days downtown and walking around and seeing it, I couldn't help but think about what's the commercial real estate market. And I know you're

in the data center side of the business, but I do want to get your thoughts. And how do you see you and I think about this from a digital transformation and warehouse for ones and zeros and data centers and key data center markets? That's how you and I think about this. But from a CBRE lens, what do you think of the commercial real estate business? How is this going to be transformed by COVID? Yeah. Yeah. So I can't answer that question from an official CB standpoint, but what I can tell you just as a professional in the space is the office realm is going to be impacted, not because

people aren't going to use office space anymore. I think there is still a very strong, perhaps even a stronger desire for many functions to be in the office. And I think a lot of people work from home has been nice for whatever reason, but, you know, being able to be in a place where you can focus on work, where you're surrounded by colleagues, having that camaraderie, but also having a place where you can have all the resources that you need to function. I think that's going to continue for a lot of roles. I do think there are certain roles where work from home has been really pleasant. And having that option has been a really nice life change. And I think companies will see that and many companies will provide

the option, which will attract talent. With that said, you go to downtown Dallas, there's a lot of big leases in a lot of those big tall towers with limited parking where you've got a lot of people commuting in. And I think the renewal scheme over the next five years is going to cause some heartburn for a lot of these tenants that have, you know, maybe they're in 100,000 feet and they realize, you know, we really only need 60,000 because we're going to cause some heartburn for a lot of these tenants that have, you know, maybe they're in 100,000 feet and they realize, you know, we really only need 60,000 because we're going to allow remote working or whatever, or we're going to reconfigure, we want to reconfigure our space. So it's more bring your own device. It's more workplace 360, which is something CB has been doing at our own offices around the country for a long time to provide more flexibility for

employees. And so I do think that's going to cause there to be some big chunks of vacancy for a while. Currently, there's as much space for sublease in Dallas as there is office space for lease. And so that's a concerning trend. I think it's going to take some time to recover from that. I think from Texas's perspective, we're actually fairly insulate. We're going to be fairly insulated because I think the amount of migration that we're going to experience from companies coming from coastal cities into Texas is going to be dramatic. And we've already seen some of that, but I think it's just getting started. It's accelerating, isn't it, Haynes? We're in some markets, it's going to be a real challenge. And I think it's going to take a while. Fortunately for CBRE, we're a really diversified company.

We've got a great space and, you know, data centers, obviously. But if you look at our industrial business, it will be the engine that drives our company in a lot of ways this year. And the industrial business is on fire. I mean, just e-commerce has driven, in a good way, e-commerce has just driven tremendous demand. And, you know, Dallas, we're seeing double-digit industrial rents in some parts of the city.

We're seeing double-digit industrial rents in New Jersey and New York and around the country in key markets. And that's a huge shift from over, you know, five years ago. And I think that's only going to continue for a lot of the technological reasons that we just talked about. I mean, the ability to optimize supply chain and deliver things remotely without having to have a showcase space or retail space where

people are coming in and people can now be comfortable ordering things online, that trend is only going to continue. And then when it comes to retail, you know, I don't know that I can speak with a lot of intelligence around what's going to happen to malls and big box retail. But what I can tell you, and this is really just from personal experiences, we over Thanksgiving went to Topgolf. And I was stunned by how busy it was. And you know, I had a great time and all that. But the reality is people want to get out and do stuff. People want to get out. They want to go eat. Yes, they can order food at their house, but people like going to restaurants. They like going to retail. So I think experiential retail will rebound. I think the lockdowns and the restrictions on retail has been devastating for a lot of small businesses. But I think there's a lot of appetite to invest in that space when things normalize. And while it's going to be really sad to see some staple restaurants go,

I heard 21 Club in New York is gone recently, which just breaks my heart because that's a special place to me that I had a lot of good memories. And so stuff like that's going to be rough. But the reality is that opens up some real estate that hasn't been available for 60 years for some new concept. And so I think ultimately retail will rebound. But again, it's going to look different. And I don't think you're going to see the amount of, you know, big box type things. But that's been coming for a while. So I think in a way this accelerated that transformation in retail as well, because businesses either could make it or they couldn't.

So we'll see how all that pans out. But what I would say is overall, I think real estate, the real estate industry is going to be OK. But we're going to have some challenges with retail and office for some time ahead of us. But, you know, you look at life sciences and medical space booming right now. You look at the hotel business, while it's been definitely challenged during COVID, it's starting to see signs of life into this year and into 2021, which is great. And hopefully, there's some recovery there. And fortunately, there's been a lot of consolidation in the hotel space. So there's some financial structure. Unfortunately, there's been a lot of consolidation in the hotel space. So there's some financial structure there that can survive this thing.

Overall, it will be okay. It's just going to take people getting out of their houses and getting back to some form of life similar to what it was like before COVID. But I do think it's going to look very different. You think about as it relates to hotels, and then you think about business travel and how much companies are willing to spend on business travel. And I've seen reports anywhere from 30% to 60% cuts to business travel. Well, there's plenty of markets where that's going to have a huge impact on hotels, on retail, on transportation, all that kind of stuff. And so it'll be really interesting to see what that does. And when you think about airlines and all of that and leisure travel, business travel really subsidizes a lot of leisure travel because the business travel makes the airline profitable to go to as many places as it flies.

And so if they're not seeing that, do we see a cut down in routes and availabilities? And what does that do to markets? And so I think there's a, this is going to have a long, longer tail on it than it's, you know, a year from now, it's not going to be right back to where it was. And so I think there's going to be some serious impacts to different aspects of the real estate business. But at the same time, you know, I think the hope is we're going to see some growth. And you look at technology companies that are growing, they're not slowing down on office. You know, I mean, they're still taking down office, planning new headquarters, all that kind of stuff. And we're seeing tons of new technology companies popping out of the grass because of COVID and what it's driven to the opportunity it's creating for technology companies to solve problems. So I think we'll continue to see, you know, new opportunities and new growth that are going to look different. But it's kind of all across the board. I think I feel very fortunate to be in the data center space through this because I know

it's been tough in other sectors. Yeah, we share your sentiment. I hate that the kind of problem the world has faced with this pandemic has led our business doing well while other businesses have been destroyed. I understand that we're blessed and fortunate and feel terrible for those folks whose business have been hurt. But I think if I could summarize your thoughts, and I think this is what I hear you saying is the world's going to change. The real estate market is going to change, but it's not going away. And completely agree, right?

The entrepreneurial spirit, people wanting to be social, people wanting to connect. How we do things is going to fundamentally change, including how we go to work. But we're not going to stop going to work, right? And I mean, by going, I literally mean going, right? I think you're right. The functions that go in and the frequency with which you go in. And I think all of that is going to transform. But the reality is we're going to settle into as much as I'm not crazy about the term,

we are going to settle into what a new normal looks like. What does the world look like? I think the flexibility of people coming in five days a week and commuting and all of that, I think all of that is companies' eyes and perception and vision have been open and transformed and changed based on this event. And the way things look are going to be different, but there's going to be real estate, there's going to be offices, there's going to be industrial, to your point, the idea, you know, I loved your reference to the food services group, right? We've still got to make food. People are going to eat. It's just, do we do it sitting in a restaurant or do we do it in an industrial or

commercial kitchen that does delivery? Things, we're all going to continue to buy clothes, eat, and go to work. It's just going to look different in the future. And I agree with you, too. This isn't going to be transformed by June of 2021. This is a multi-year shift in the way things look. And you can back up to pre the concept of the mall, right? People went shopping and nobody knew what a mall was.

And the malls came along and, you know, sort of downtown areas got thinned out and moved to the suburbs. These transformations happen, but it's over years. And this one just, the impetus here was quick. And I think it'll be many, many years as we transform. And I also liked your Topgolf reference. People want to be around other people, right? Having food brought to your house is great, but it's different than being in an atmosphere

and hearing live music and seeing your friends and getting dressed up and all of those things that are part of just being social beings, which we all are. So I agree with that. Well, Haynes, this has been good as we've talked about the bigger picture. If you're willing, we'd love to hear a little bit market-driven around North America, places, agree with that assessment. And if you'd be willing to share with us what you see at a market level or an activity level, or maybe a little bit of what 2020 looked like from an absorption perspective and what you are excited about in 2021 would be great. Yeah, absolutely. Happy to do that. And, you know, I don't have, we have not collected all of the Q4 data yet. So I'll give you

what I've got, but note that still changes and updates to come. So we'll just touch on, why don't we start in Silicon Valley? It's been a pretty crazy year. Vacancy is sub 5% in Silicon Valley. There's very little space available, less than 20 megawatts available. I think it's right now, I think there's about 11 megawatts of vacant capacity. And there's been approximately 23 megawatts of absorption year to date, and that's not including the fourth quarter. But if you absorbed everything, you wouldn't be beyond 40 megawatts of absorption. So my gut is that I'll end up around 30 megs of absorption in that market just based on a capacity constraint, but get tons of product under construction. And when you look at the Silicon Valley market, you've got 25 megs under construction right now. You've got another 80 planned that will probably start to break ground in 21 and 22. But just the timeline to build new

product in Santa Clara and that market is really long. And so I think Santa Clara continues to be a very healthy market with premium rates because of the limited supply. You get a premium for the difficulty of developing in that market. But it continues to be an important market, I think, despite high power rates and seismic risks and all that kind of stuff. The reality is tech companies like having something, some of their compute near where their people are. And that continues to be an important factor in that market,

which I think we'll see continuing. If you go up where we've seen a lot of activity is really in Vegas and Reno. And we don't have down to the minute stats in those markets just because they're dominated by Switch. And we don't have as much public information from Switch as far as performance. But reality is Switch is building their newest NAP right now. They've filled up most of SuperNAP 9 and are under construction at SuperNAP 10, which is another 40 megawatts. So I think we anticipate, you know, that market is doing somewhere between 25 to 30 megawatts a year. And then Reno's probably doing about the same, which is also switch. And they're already building out their phase three there. So, you know, lots going on in that market. And a lot of that activity is coming, I think,

out of demand that has been kind of stuffed up in Santa Clara, just because there's not enough supply. So continue to see activity there. And I think we'll continue to see that market grow. If you kind of just keep going south into Phoenix, we really like the Phoenix market. It has a lot of the right fundamentals as far as availability of power, ease of working with the municipality, good tax incentives in that area. And so, you know, overall, they had over 20 megawatts. They've had, I think, 25 megawatts of absorption year to date.

Again, not going into the fourth quarter, but I think it's 25.5 megawatts if I'm reading my notes right here. And there's 28 megawatts under construction right now. We saw Iron Mountain secure a substantial lease with one of the major hyperscalers. And we also saw one of the private developers aligned continue to get a nice enterprise deal at their site. So, you know, it's a busy market. There's a lot of competition. Obviously, Compass and Stream are building big sites out in Goodyear where some of the hyperscalers are also developing

their own space. And so I anticipate we're going to see some exciting activity in 21 in Phoenix. We are aware of a number of large deals circling that market. And many of them have location requirements where they may have one or two, or sorry, two or more sites that have to be a certain distance apart. And so we really like, you know, there's a there's a great cluster right by the airport. There's another cluster up near closer to Scottsdale. And then there's this kind of new cluster in Goodyear that I think is going to drive some cool activity in that market in 21. As you kind of head, we'll pause in Denver really quickly and then head back down to Dallas. You know, the Denver market's really interesting because it's, you know, it's one of the best connected markets in the country from a fiber

standpoint. And you have a lot of retail colo providers in that market flex central has a very strong presence there zeo core site equinix six sterile edge connects and there's there's a lot of providers in that market but they're they're mostly uh h5s another one they're mostly smaller buildings they're not building kind of these large hyperscale facilities and we've seen some large deals get done there iron mountain secured a large government contract there Flex Central recently did a large hyperscale deal. So there is activity in that market, you know, I think we view Denver as a really good growth market in the long term. It's just, you know, absorption year over year in that market is usually three to seven megawatts. I think it'll be closer to seven this year and maybe even a little higher than that. But good activity, but definitely a secondary market. Jumping down to Dallas, it has been a wonky year in Dallas.

We had a really good first quarter and pretty slow second quarter. We've had a very busy third and fourth quarter. So the market overall is at about 30 megawatts a year to date. And I think we'll probably add three or four more to that number by the end of the year once we've done the final count. But there are so many providers. There's 24 co-location providers in the Dallas market. How many? Did you say? 24. 24. It's a long list. And that's frankly probably not including a couple that we don't view as

hyper-competitive. But I can't remember the number of facilities, but it's more than 60 data, colo data center facilities. And within that, you know, there's 15 that can do a one megawatt deal today. And so when a deal hits the market, it's just really competitive. And the challenge that we've we've seen from landlords is, you know, they don't feel like there's great market activity. And even when there is, it's because there's just too many competitors to see every deal. And we see a lot of deals get done with, you know, the larger REITs with existing customers out of other markets, and it doesn't go to a full process and all that. So the great thing about Dallas is if you're a tenant, there literally is not a better market in the history of the colo business than Dallas to go lease space right now because power is as cheap as it's ever been.

Colo rates are as cheap as it's ever been. And there's lots of choices. And so, you know, land, on the other hand, is getting pretty scarce. But we've seen a lot of activity. Digital realty has been very busy. Cyrus One's had a few big wins this year. Equinix has knocked it out of the park with their addition at 1990 North Stemmons. The new building next to the InfoMark has been just a big success for them. The campus up in Allen is fully accommodated and you guys have gone down south with your new build. And Google has publicly been there in Midlothian and they own some land in Red Oak. And we've seen some other users looking south.

So I anticipate you guys will find success there. But, you know, the Dallas market is a unique market relative to pretty much everywhere else in the country. I'll flip down. I'll do Atlanta and then we can go to Northern Virginia real quick. So Atlanta, I've actually been kind of bearish on Atlanta just because it hasn't had all this historic absorption to prove up the amount of development there. There's a ton of construction going on. There's a lot of new providers in that market. And vacancy got pretty high. This year, it was at 20 megs in a 150 megawatt market. That's almost 15% of vacancy. And again, there's building 28 megs. So that's a lot of construction. But year to date, we've seen in Atlanta, really good leasing activity. So they've had about 15 megawatts of absorption year to date.

And I think we'll see probably another four or five in the fourth quarter here, which isn't quite keeping pace with supply, but it's not out of control. So I think Atlanta is going to continue to be a really good market. I think the state of Georgia passing the tax incentives that they did attracted, obviously, growth from Facebook and Google and others. But I think we'll see other groups really taking advantage of that because you can, as a tenant, take advantage of that in the Georgia market, which is really attractive. So I'll go to Northern Virginia last and we can stop there. But, you know, NOVA is just remains a global market within itself. And it's you know, it's just wild what's going on there.

So there will be about 200 megawatts of absorption in 2020, which is which is a big number. And I believe the number is we're over 140 megawatts of pre-leasing for 2021. So that space has already been allocated that's currently under construction. That's just unprecedented. You kind of hear numbers from these other markets. It's nuts. And so Innova had about 250 megs of absorption in 2019, if that's a point of comparison. But the reality is land is getting really tight.

Power is getting really tight. Power is getting really tight. And, you know, for the Ashburn proper area, very limited number of opportunities for continued growth from the data center perspective. But there are a number of users there. We've seen a lot get pushed out to Manassas and Reston. Obviously, Compass has a campus. Is that in Manassas proper? Leesburg. It's on the other direction. Yeah, yeah. So just north of Ashburn. So lots of, you know, I think we're going to continue to see hyperscale as the dominant player here. We do a lot of financial services business in this market. There's obviously a lot of government and federal business in this market.

And I think we're going to continue to see a lot of that roll out. One other thing I just comment on is, and I can't say too much, but there are a number of big federal contracts that are out in the market today. And I think when you look at the Jedi program, which has obviously been very publicly you know, the scale of that program, wherever it ends up going, you know, hyperscale, you know, and all that. I know Microsoft is one of a big chunk of it, but however that gets deployed, it's hundreds of megawatts over the next several years. You know, that can transform a market really, really quickly. So I think we're going to see the impact of that start to take place in 21, but I probably will see more clearly where that all lays out in 22 and 23 and moving forward. But there's going to be deals like that, that I think are going to

really go into a market like Salt Lake or Kansas City or something like that, where it would just completely transform that market. I think there's a lot of exciting activity yet to happen. And that's just what we know about and not really incorporating new technology and 5G and all the crazy stuff that's in development right now. Yeah, that is pretty amazing, Haynes, when you think about it as we spent 40 minutes talking about the data center business and we didn't say the word 5G until we were 40 minutes into it. It's coming and it's certainly, you know, you got the devices and the commercial networks being built now.

But I know it was the first thing I think on everyone's lips about a year ago. And now the pandemic is and what the pandemic has done to change the way people operate has taken center stage. But I agree with you. 5G is coming and your comment about the government contracts, I completely agree. There is so much activity at the federal level there in NOVA, which to me is a little bit, on the one hand, I get it because D.C., but at the same time, I start to think from a global communications and Internet security standpoint. At some point, so much traffic and so much information and so much of what the world depends on from a technology standpoint. Being in one place worries me a little.

I know on this podcast and you and I can't do anything about it, but it almost to me, thinking back to 9-11 and the symbolism of attacking the globe's financial center. You know, I think that there's potential for that area to just be too attractive a target for a terrorist attack. There's so much information and so much data and so much transport and so much commerce that goes through there. It's not going to slow down to your point, but just to me, it makes me think that diversity on the East Coast would be a good thing, which makes me think of Atlanta or Columbus, even though I know Columbus is not a coastal city, but just ways to diversify some of that demand, because you're right, that market is just unbelievable year after year after year.

Yeah. But, you know, I think if you think about it in that regard, globally, the other major connection markets, it's a single city in other countries, right? You know, it's Singapore, it's Hong Kong, it's London, you know, it's not North America. We're pretty spread out relative to other countries just because of the sheer size of the country. That's true. Yeah. Yeah. That's fair. Absolutely correct. Well, can I ask about one city you didn't mention just because I'd love to hear your thoughts. Chicago, it's just thoughts around i'd love to hear your thoughts chicago it's um just thoughts around chicago um love to hear your thoughts chicago has had a big year particular hyperscaler has taken down i think now over 40 megawatts of space in that market uh in the last 18 months um there's been good enterprise activity as well but we've've seen Elk Grove Village just really on fire as far

as, you know, stack infrastructure, getting their facility leased up and now building the next phase. Stream got their first facility that they built in that market leased up, building their next phase. Digital has done really well at their Franklin Park campus. Cyrus One is doing well at their Aurora campus. And then you've got, obviously, very little vacancy at 350 East Cermak. I think Server Farm has had even a couple of good transactions this year. And then QTS also, I think, has grown at a good pace this year. Chicago, they've had years where there's just not been much activity.

But I think for overall, depending on how you track it, if you don't include powered shell, the absorption numbers are a little bit lower. You're around, you know, 15 megawatts of true turnkey. But if you include powered shell, that number gets up to 30, 40 megawatts pretty quickly. So it just depends how you look at it. But I think Chicago continues to be a really critical market. And the Illinois tax incentives that were passed, I think, will be beneficial to Chicago in the long run. Well, I appreciate that perspective. Yeah, it has been a busy, busy year up there, and I wanted to hear if you guys had seen the same thing. So we're not in the market, but certainly connected and have friends in that space, and I've heard it's been a heck of a year up there. Yeah, for sure. For sure. We're seeing some diversity in the larger hyperscales looking at that market, for sure.

Yeah. Well, Haynes, that is a really, really, really good rundown of the markets. I appreciate you having the homework handy at your fingertips and being willing to share with us CBRE's perspective on North America, bringing it full circle. Enjoy your first Christmas with Charlotte. Thank you. What an exciting time. Grateful to hear that she's sleeping through the night. Another huge bonus.

And we've been picked up a few times by some of the news services and gotten up close to 5,000 listeners. So we'll look forward to hearing from them here in the new year and excited about 2021 and really, really grateful, Haynes, to have you join us. Hope you and your family have a great holiday season and we look forward to working with you in the market in 2021.

Man, thanks so much for joining me here. Thank you, Raymond. Happy holidays. Thanks for having me. Appreciate it. All right, bud, thanks so much. Thank you for listening to another edition of Not Your Father's Data Center. We hope that you and yours have a wonderful holiday season Thanks for having me. Appreciate it. ideas and suggestions. This is our last recording in 2020, and we'd love to hear things you'd like to hear about in 2021. We look forward to hearing from you. You can also reach out to us on Twitter

or on our website, but love to hear your feedback and love to talk with all of you again in 2021. Have a great year.