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Phoenix A Prime Spot For More Data Centers

Data center development is escalating nationwide to meet demand, and Phoenix is poised to be one of the top markets capturing some of that growth, according to JLL.

A close-up of a data center server bank

“While data center absorption has calmed in some markets across the U.S., Phoenix is actually ramping up — emerging from a time of constrained supply into a period in where almost 38 MW of new product is under construction," JLL Data Center Solutions Group Managing Director Mark Bauer said.

Data center construction in North America is up 43% from 2016 and industry consolidation powered a $10B surge in M&A in the first half of 2017, JLL noted in a Q3 report on the data center market.

Locally, CyrusOne, Aligned Energy and IO Data Centers (just acquired by Iron Mountain) have projects underway, and Digital Realty is positioning assets to welcome more large-scale leasing.

According to Bauer, data center developers and operators look to Arizona because it ranks as a top 10 U.S. location for low catastrophic and natural disaster risk, making it a safe place for data center developers to plant their flags.

Bauer, Mark JLL
JLL Data Center Solutions Group Managing Director Mark Bauer

Phoenix has other advantages, as far as data center developers are concerned. 

"The cost of doing business is also extremely advantageous, supported by a highly skilled and low-cost STEM workforce, electricity costs that are less than the national average and 50% lower than the average rate in California and attractively priced real estate," Bauer said.

This cost advantage extends to taxes as well, via the Arizona Computer Data Center Program, which abates sales and transaction privilege taxes for qualifying data center developers, operators and end user customers.

"The program contributes to Arizona's position as one of the top three tax structures in the country for data center developers and owners," Bauer said.