The metro Phoenix area is considered one of the Top 10 Data Center Markets in the U.S. — as high as No. 6 by some measures. While the “Valley of the Sun” is not in the top 10 for population, its data center market share is a direct function of its many competitive advantages: a desirable and affordable western market for colocation, cloud, enterprise and all other data center users. Phoenix has always been a significant draw from Silicon Valley and Southern California enterprise corporations seeking competitively priced and safer alternatives to colocate their IT equipment. They see Phoenix as an excellent disaster recovery and business continuity solution. We take a look at why Phoenix should expect continued and sustained growth.
Over the past two years, Phoenix has experienced all-time highs in data center demand and colocation construction of new raised floor environments has kept up. Following a record year in 2016, Phoenix’s data center and colocation market in 2017 jumped to over 30 MWs of absorption. While not quantified, several resources are reporting that 2018 should exceed that demand. Phoenix has become a logical market for the accelerating needs of the large hyperscale cloud users, expanding enterprise customers and software-as-a service corporations. In addition, Phoenix is a desirable location as an edge data center market as major social media companies and competitors complete their geographic networks.
Phoenix’s competitive advantages extend from its minimal hazardous risk factors to its business-friendly environment. It also has two great electrical providers, Salt River Project and Arizona Public Service (APS) that provide power at electrical rates much cheaper than many of the other western markets that compete with Phoenix (such as Denver and Salt Lake City). Available land sites with significant infrastructure in place to construct new facilities are reasonably available, along with available economic incentives.
Phoenix data center history and geographical layout
During the late 1990’s Internet boom, Phoenix’s data center geography was concentrated in two areas. The first was in the downtown and surrounding core in such carrier hotel and colocation facilities as 120 East Van Buren and Central Park Mall. The second submarket was focused around Sky Harbor Airport and Tempe where several telecom carriers built out their switch and colocation sites due to the ease of construction and significant power and fiber infrastructure in place.
Fast forward to the latter of half the 2000s. One of the first major players dedicated to multi-tenant colocation was I/O Data Centers, which was recently acquired by Iron Mountain Data Centers. Before big was the norm for colocation operators, I/O retrofitted a robust ~500,000 SF facility in 2007 just north of the airport. As colocation and powered shell options gained popularity, the data center and colocation operators continued to focus on the Airport submarket but also started to concentrate in the suburban Chandler submarket further south of Phoenix in Salt River Project utility territory. Large colocation operators such as CyrusOne and Digital Realty along with up-and-coming groups such as H5 Data Centers have substantial Chandler operations.
A developing concentration of operators is located north of Phoenix in the Deer Valley submarket, where APS is the electrical provider. Flexential and Aligned Data Centers are the primary competitors.
The competitive landscape and market statistics
As Phoenix continues its year-on-year record absorption, the competition is comprised of several heavyweights in the retail and wholesale colocation sectors. And some new competitors have also pushed into the market. Here’s a list of some of the notable competition in this data center sector:
Sources: Company websites
Phoenix’s numerous strengths to deliver enterprise class data center operations will allow it to solidify its No. 6 ranking for the next several years. The demand here is actually exceeding some markets that are currently higher ranked. With all of the favorable factors meeting all of the data center site selection checklists, the Phoenix market should expect to continue its upward growth curve.