S
outhern California developers are capitalizing on the region's growing demand for data centers, driven by a rising need for cloud storage and artificial intelligence applications. According to JLL, the Los Angeles market has a vacancy rate of just 4% in the first half of the year, making it an attractive location for new projects. Cities like Vernon, Monterey Park, and El Segundo are emerging as prime destinations due to improved local regulations and their proximity to undersea fiber optic cables connecting to Asia.

    Developers are now looking beyond Los Angeles' core areas, where high land costs had previously hindered data center construction. "Cities need to be more open to data centers because it may be the highest and best use at the time," says Darren Eades, JLL's managing director. The region's connectivity to Asia makes it an ideal spot for data centers, but securing suitable sites and power availability remains a challenge.

    In Monterey Park, Revantage is developing a 218,000-square-foot data center on a site once home to an office building, while in Vernon, Prime Data Centers has completed a 243,000-square-foot facility that was fully leased before construction finished. El Segundo's proximity to undersea fiber cables makes it a hub for top data center operators like Equinix and Digital Realty.

    A KPMG study found that tech tenants are willing to pay higher prices for power due to the dire need for data centers, with Eades predicting that demand will outstrip supply in Los Angeles for years to come. "There's so much pent-up demand in the marketplace," he says.