Why Phoenix Is An Up-And-Coming Data Center Hub

Phoenix is poised for an influx of spec data center space. The demand will be there to absorb it, according to CBRE's Luke Denmon, a data center specialist.

"In recent years the lack of available product has resulted in Phoenix being passed over during multi-market site selections," Denmon said. But with 27.6 MW under construction and several other projects planned, tenants looking for a megawatt of data center capacity will have a number of new options from which to choose.

As the sixth-largest wholesale data center market in the U.S., Phoenix has nearly 153 MW of existing inventory, and 2016 saw net absorption total 10.3 MW. But market activity was actually significantly higher, Denmon said. 

Taking into account the quick turnaround of several sublease offerings and pre-leasing activity, gross leasing totaled nearly 31 MW for the year, and market activity and user demand is expected to remain strong.

“With competitive pricing for both construction and power, Arizona will continue to position itself as a destination for data center development,” Denmon said. 

The context of growth in Phoenix is nationwide growth for data centers. In major markets nationwide, 271 MW is under construction, with 45% of that pre-leased, according to CBRE data. Enterprise-driven requirements are generally shrinking as end users become more sophisticated at scaling their IT needs, but cloud providers are taking up the slack, and provided a lot of demand for multi-megawatt space in 2016.