Happy Canada Day! As a reminder, today marks the anniversary of Canadian Confederation, specifically the union of the Province of Canada, Nova Scotia, and New Brunswick on July 1, 1867.

Summer is reaching its zenith with a high of 32 degrees expected here in Toronto today. I know that everyone thinks their city is the best when it's hot and sunny outside, but I do think there's something magical about Toronto in the summer. One thing I always look forward to is the feeling of riding a bicycle around the city on a hot and humid night.

On top of this summer euphoria, it was just announced that Kawhi Leonard will be returning to the Toronto Raptors, presumably because he wants to win another championship and he misses Toronto. So, I'm fairly certain that real estate in the city just appreciated 5% over the last 24 hours.

If you're looking for something city-building-related to dig into, here's an interesting report from CBRE on global data centre trends. It specifically looks at the 4 largest markets in North America, Asia-Pacific, Europe, and Latin America. (It's a reminder that Canada needs to step up!)

Latin America led year-over-year global growth (as of Q1 2026) with a 41.3% jump in inventory (primarily Mexico). Meanwhile, the world's largest data centre market (Northern Virginia) saw its vacancy rate drop to an all-time low of 0.3%.

Overall, power availability and grid infrastructure continue to constrain new supply, and that is expected to persist beyond 2030. The tech industry is not used to being fettered by physical constraints, but we're seeing that today with the practical end of "zero marginal cost."

Enjoy the day, everyone.

Cover photo by Mayur Arvind on Unsplash

Inventory chart from CBRE

We've spoken before about how much electricity is going to be demanded by data centers in the future. According to this study, data center energy usage is expected to represent somewhere between 6.7-12% of total electricity consumption in the US by 2028. And according to McKinsey, demand for data centers is going to at least 4x by the end of this decade. So the consensus is that we are going to need more, not less, data centers in the foreseeable future.

But if data centers represent the physical infrastructure needed for our digital activities, it's both interesting and valuable to think about where this stuff wants to go, especially since tech is, in some ways, a decentralizing force for cities. Interestingly enough, they exhibit the same economies of agglomeration as many other urban activities in that they want to be near density and other data centers. Maybe even more so.

Here's an excerpt from a Harvard Business School report (2022) called "Where the Cloud Rests: The Location Strategies of Data Centers."

The study finds a pervasive urban bias in the location of third-party data centers. For example, we find that all large metropolitan areas with over 700,000 population have at least one supplier. Less dense areas may or may not have any. Moreover, local entry rises with the presence of local information industries and intensive data users, such as finance, insurance, and real estate. Because less supply locates in the areas with lower density, a high fraction of buyers in small and medium-sized locations must get their services from non-local suppliers—likely located in the closest major city. Relatedly, we also find supply of more specialty services in denser and more competitive locations. We interpret all these patterns as the result of tension between economies of scale and user preference for proximity.

And here's a quote from LA-based Rising Realty Partners:

Once a data center hub is entrenched, it tends to create its own gravitational pull. Data center tenants want to be near other data center tenants. And the main hubs also boast high levels of connectivity. The calculus is straightforward: It’s far easier to run a fiber optic cable across the street or across town than to run a connection across the state or country.

This is what is happening in Northern Virginia with "Data Center Alley" and what is now now referred to as the world's largest data center hub. As of July 2024, Loudoun County, VA (which is located just 34 miles from Washington, DC) had 43 million square feet of existing data centers and ~47 million more square feet in the pipeline. This represents an increase of ~60 million square feet compared to where the area was as recently as 2022.

Overall, there are only so many "primary" data center markets in the US. CBRE lists 8. This makes it a relatively concentrated real estate asset class in terms of geography.

Cover photo by Claudio Schwarz on Unsplash

Amazon unveiled the design for part of its new HQ2 campus in Arlington today. The plan is a cluster of new office and retail buildings that will accommodate some 13,000 employees. When fully built out, its HQ2 is expected to house upwards of 25,000 employees.

The centerpiece of the proposed campus is something that is being called the Helix, which is a spiraling building with outdoor walkways housing native trees and plants from the Virginia area. The idea is that it will become a place for people to go for walks and hikes "outside."

Here's what that looks like (image from architecture firm NBBJ):

In addition to a cool spiraling building, it's of course also noteworthy that Amazon (along with many other companies) is continuing to forge ahead with its plans to build and occupy more office space in important urban centers.

Here's a quote from a recent WSJ article talking about the HQ2 announcement:

While numerous tech firms have pledged to allow employees to work from home even after the coronavirus pandemic is contained, Amazon, Facebook Inc., Alphabet Inc.’s Google and others have continued to expand their urban office footprints. By investing heavily in big city real estate, they are betting that office space will be an important part of their corporate culture after the pandemic is over.

“We have to think about this as a long-term investment,” said John Schoettler, Amazon’s vice president of global real estate and facilities. “These buildings will begin to deliver in 2025. And so we believe that the world will be a much improved place than it is currently.”

Like most companies, they are naturally questioning to what extent some employees won't be going into the office every weekday. But even still, the above announcement is yet another great example of why office space -- and spiraling outdoor spaces -- will continue to form an important part of the future of work.