Phoenix Continues to Thrive as a Leading Data Center Market

The metro Phoenix data center market from 2018 into 2019 has been bustling both with significant new construction and recent announcements, helping to vault its ranking upward as one of the Top 10 data center markets in the U.S. While just three years ago its ranking stood at No. 10, its competitive advantages and friendly business climate have made the region a popular choice in data center site selection. Now metro Phoenix is slotted as the No. 5 U.S. data center market in overall capacity, overtaking much larger business centers such as Los Angeles, Greater New York/Northern New Jersey and Atlanta. And it stands poised to move another rung or two as hundreds of megawatts comprising several existing data center developers along with a few new entrants are in the pipeline.

The Phoenix region benefits significantly from its location in the U.S. and hits top marks across the site selection matrix of imperative requirements, notably:

• Competitive Power Rates:As compared to the other markets in the western half of the U.S., Phoenix’s cost of power is well below the average cost per kwh than many of the other western U.S. utilities in markets where Phoenix competes (such as Denver and Salt Lake City).
• Reliable Electric Provider:Phoenix has two great electrical providers, Salt River Project and Arizona Public Service (APS) that provide service throughout the region.
• Natural Risks:The region does not have any real natural disaster risks to speak of, as most climate concerns, such as tornadoes, flooding or hurricanes, are pretty much nonexistent, and it is not near any fault lines.
• Fiber:Over 12 dark and lit providers throughout the region can provide robust connectivity.
• Economic Incentives:Above a defined threshold in capital investment, the state of Arizona offers 10-year tax waivers as well as state and local sales tax rebates for both data center equipment purchases and labor expenses. These incentives can shave millions off the construction costs which has directly helped this massive growth.
• Available Sites:In many of the submarkets where data centers are clustered, there are available land sites at reasonable cost even on those large sites needed for hyperscale and wholesale colocation campuses.

Microsoft plans data center cloud initiative in Phoenix

Microsoft put its approval stamp on the metro Phoenix region in a big way announcing its plan for three new 100+ megawatt campuses here to support its burgeoning cloud business. Two campuses are in west Phoenix in the city of Goodyear with the other further north in the city of El Mirage.

While the Northern Virginia region, and especially Loudoun County, remains the epicenter of cloud networking, such major initiatives in Phoenix by a dominant player such as Microsoft can only bolster Phoenix’s presence in this sector.

Competitive colocation and powered shell landscape gets congested

The general submarkets outside of downtown where the concentration of colocation providers are located are the following:

• Tempe/Sky Harbor Airport:generally the first suburban data center market where the major telecom and retail colocation companies located starting in the late ’90s due to the excellent infrastructure in place
• Chandler/South Phoenix:further south from Tempe where the Salt River Project utility is the provider
• Deer Valley:on the northern end of Phoenix where Arizona State Route 101 and Interstate 17 intersect
• Goodyear/West Phoenix:the latest “hot spot” located in the West Phoenix sector

Pretty much every major enterprise class data center developer and colocation operator maintain significant facilities all with ongoing expansion plans, with a few new notable competitors making recent 2019 commitments to the region. The following are some of the competition in certain submarkets:

Tempe/Sky Harbor

• Iron Mountain Data Centers: With its acquisition of I/O Data Centers, Iron Mountain instantly became one of the major players in the market. The company has since nearly doubled the campus by adding 550,000 square feet and 48-megawatts.

Chandler/South Phoenix

• Digital Realty: Its Chandler Price Road campus has over 520,000 SF and up to 60 MVA of power, not including future expansion.
• CyrusOne:CyrusOne, starting in 2011, has now grown as one of the largest colocation providers here, with over 85 acres of secured campus and planned development exceeding 90 megawatts across two campuses in Chandler and Mesa.
• EdgeCore:This new wholesale colocation provider located in the Mesa Elliot Technology Corridor (southeast Mesa) is delivering its first phase in 2019 and can offer over 1.25 million square feet and 280 MWs from its on-site substation.
• H5 Data Centers: H5 upgraded an existing 180,000 SF data center that can now offer up to 30 megawatts of both retail colocation and wholesale colocation.
• INAP:INAP recently took over the Bank of America data center as its operator, with BofA downsizing into a colocation customer, allowing INAP to expand and offer colocation space in this 191,000 SF facility.

Deer Valley

• Aligned Data Centers:With its flexible data center design that can offer high density up to 50 KW per cabinet capacity, Aligned’s 51-acre campus can total 550,000 SF and 120 megawatts. Its second phase under construction will offer 200,000 SF and 60 MWs with a guaranteed PUE of 1.15.
• Evocative: Co-located on Aligned’s campus where Aligned targets wholesale colocation users, Evocative Data Centers provides managed colocation in the same facility for customers of ~1 MW or less.
• Flexential: In its 110,000 SF facility, Flexential offers 5 MWs of colocation space.

Goodyear/West Phoenix (two new competitors entering the market for 2019)

• Stream Data Centers:Acquired a 418,000 SF facility with 157 acres of land this year that can expand to over 2 million SF and 350 MWs at full build out.
• Compass Data Centers:Its land site acquisition in Goodyear will allow it to construct a 350+ MW campus of turnkey data center build-to-suits.

Conclusions

There continues to be significant bullish confidence on the entire Phoenix data center market.  Its overwhelming advantages will continue to allow this market to be an important player in the U.S. for all data center users and their needs.