In a banner year for data center expansion, several markets in the West are seeing heightened construction and leasing activity as demand for data storage and processing continues to climb.

A combination of remote work, cheap power and government incentives is driving up demand in markets like Utah, Colorado and Arizona, which enjoy proximity to Silicon Valley and a number of other appealing traits for data center firms. Industry experts say it is still early innings for data centers, with Western cities capturing much of the growth among secondary markets.

“People want to be near their data, and when you see tech companies migrating, you’ll see data centers,” said Greg Vernon, senior vice president with CBRE’s Data Center Solutions group.

Although Silicon Valley is still the largest data center market in the western U.S., and Northern Virginia is the largest overall, secondary markets like Salt Lake City are growing at a rapid clip. According to CBRE, the Salt Lake City metro area has 500K SF of data center space currently under construction, which will more than double its current volume of 482K SF. An additional 1.5M SF is planned.

Attractive tax rates, notably, a sales tax abatement on data center equipment enacted this year, have helped to lure more data centers and tech firms to greater Salt Lake City, which also boasts robust fiber infrastructure and low energy rates.

Facebook is building a 1.5M SF data center in nearby Eagle Mountain, and Novva, a large colocation provider, plans to invest $1B in a 100-acre campus in West Jordan. Other significant deals and developments are likely coming down the pike, said Mark Bauer, managing director with JLL’s Data Center Solutions group.

“The entire metro of Salt Lake City is very e-commerce-focused, with a lot of technology companies located there, and the labor base is strong,” Bauer noted.

The rise of remote work, and a steady influx of tech firms, has helped to drive up data center leasing activity in Denver.

Palantir Technologies, Salesforce, Facebook and Slack are a few of the major tech firms with a sizable Denver footprint or plans to establish one. Palantir, a big data analytics firm founded in Palo Alto, announced in August that it will relocate its headquarters to Denver. The city’s reasonable cost of living and strong base of tech talent has made it a natural place for tech companies to expand, and for remote workers to take up residence in COVID-19.

Those trends are reflected in high demand for data center space, Vernon said. Among secondary markets, Denver had the second-most data center leasing activity in the first half of 2020, according to CBRE. Favorable energy policies are expected to raise the region’s appeal even more: Xcel, Colorado’s largest utility firm, recently rolled out an economic development plan that slashes electricity rates for commercial and industrial customers.

Expect heightened activity in nearby Aurora, Vernon added. Colorado Springs, home to military and aerospace facilities, with robust infrastructure to match, appears primed for data center development as well.

“There’s available land, so much development, and proximity to the airport and new hotels [in Aurora],” Vernon said. “If you can find good affordable land with good infrastructure 15 minutes from an airport, that’s a good deal.”

Lured by competitive electricity rates, ample land and renewable energy, data-hungry cloud infrastructure firms are putting down roots in Phoenix, Bauer added. Oracle and Apple both maintain large data centers in the Phoenix metro area, with new Google and Microsoft facilities in the works.

“If there’s one thing that Phoenix has a lot of, it’s sun and land,” Bauer said.

With two utilities covering Phoenix, APS and Salt River Project, energy is both reliable and affordable, raising the region’s appeal for large colocation providers like Aligned.

Phoenix is the second-fastest-growing data center market in the U.S. by year-over-year net absorption, with 18.5 megawatts absorbed in the first half of 2020, according to JLL. Another 24 MW are under construction in the market, which places Phoenix fifth in the U.S. in terms of new build activity.

“It’s fortunate to see data centers thriving in Phoenix, which is impressive given the year we’ve had. It shows great promise for the future of this sector in the market,” Bauer added.