Phoenix, a Big Beneficiary of Data Center Surge

Data center activity is surging across the country, and—like other West Coast markets—Phoenix is benefiting from the growth. The market had 32.5 megawatts of net absorption in the first half of 2018, making it the second market in the country to Northern Virginia for data center activity, according to research from CBRE. This is also a record pace for the year for Phoenix. The activity was led by expansions from CyrusOne, Aligned Data Centers, Iron Mountain and EdgeCore.

“Data centers need several key factors to be successful: quality land with robust fiber connectivity and access to competitively priced, clean power. Phoenix is well equipped with both,” Mark Krison, SVP at CBRE, tells GlobeSt.com. “These features, coupled with metro Phoenix’s strong incentives programs, lower operating costs and low risk for natural disasters, make the metro an ideal setting for data centers. As such, we continue to see a growing interest from new and existing data center providers.”

The activity has also fueled data center construction activity. Since 2017, the Phoenix data center supply has increased by 46 megawatts, bringing the total inventory to 212.9 megawatts. As a result, Phoenix is the fifth largest data center market in the country. The pipeline is only growing. There are currently 61.4 megawatts under construction and more than 120 megawatts announced for future construction. “Over the past several months, major data center operators have acquired land for the development of new Tier III quality data center product for lease. As such, new space will be ready for occupancy over the next 12-18 months,” says Krison.

Phoenix isn’t a new data center market; however, data center growth across the nation has fueled more activity and new development. “Historically, Metro Phoenix has seen an equal balance of supply and demand for data center space,” says Krison. “With the acquisition of land and the development of new product, metro phoenix will continue to see more activity from both hyperscale and cloud providers looking to service the growing Arizona market. The other major markets of Northern Virginia and Dallas, Texas are also very active. Phoenix is now emerging at the West Coast alternative for companies to target.”

With the new development pipeline, data center activity is likely to continue to be healthy. “The outlook for the phoenix market is good and getting better as new development takes place and more options are available for companies to see,” adds Krison. “With this new development, investors will continue to consider this market for the acquisition of leased product over the next months and years to come.”