The Phoenix Market Special Report
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Special Report The Phoenix Market Written by Rich Miller Photo courtesy Data Center Frontier A view of the mountains in Mesa, Arizona, as seen from the Elliott Road Technology Corridor. brought to you by © 2021 Data Center Frontier Phoenix Market SPECIAL REPORT Contents Introduction................................................ 2 CyrusOne ................................................ 8 About Data Center Frontier ........................... 2 Cyxtera .................................................. 9 About datacenterHawk ................................ 2 DataBank (zColo) ........................................ 9 Market Overview & Analysis .............................. 3 Digital Realty ..........................................10 What’s Hot About Phoenix? ............................ 4 EdgeConneX ............................................10 Trends in Demand ....................................... 5 EdgeCore ...............................................11 Trends in Supply ......................................... 6 Flexential ..............................................11 Business Environment .................................... 7 H5 Data Centers ........................................11 Connectivity ............................................. 7 INAP .....................................................12 Power ..................................................... 7 Iron Mountain Data Centers .........................12 Hazard Risk Overview .................................. 7 PhoenixNAP ............................................12 Economic Development and Incentives .............. 7 QTS Data Centers ......................................13 Overview of Major Providers ............................ 8 STACK Infrastructure .................................13 NTT Global Data Centers Americas .................. 8 Stream Data Centers ..................................13 Aligned Data Centers .................................. 8 About Our Sponsor ........................................14 Compass Datacenters .................................. 8 datacenterHawk Methodology ........................15 Introduction This report was prepared by Data Center Frontier, in conjunction with datacenterHawk. ABOUT DATA CENTER FRONTIER ABOUT DATACENTERHAWK http://datacenterfrontier.com http://www.datacenterhawk.com Data Center Frontier charts the future of data Experts use datacenterHawk’s online tools for centers and cloud computing. We write about what’s instant access to hard-to-get info on the data next for the Internet, and the innovations that center industry. will take us there. The data center is our prism. For strategic leaders, we aggregate and analyze We tell the story of the digital economy through our data at the market level each quarter, spanning the facilities that power the cloud and the people 20+ markets in North America and 5 in Europe, with who build them. In writing about data centers and historical data on 15+ quarters for most markets. thought leaders, we explain the importance of how and where these facilities are built, how they are For professionals, our search tool lets you instantly powered, and their impact on the Internet and the find and drill down on individual data center communities around them. facilities across 120+ markets. Data Center Frontier is edited by Rich Miller, the On datacenterHawk, you can also find: data center industry’s most experienced journalist. ▶ Capacity figures broken out into commissioned, For more than 15 years, Rich has profiled the available, under construction, and planned power key role played by data centers in the Internet and space at both the markets and facility level revolution. ▶ Pricing for different transaction sizes across markets ▶ Data centers owned by private companies Visit www.datacenterhawk.com now to get up and running. © 2021 Data Center Frontier 2 Phoenix Market SPECIAL REPORT Market Overview & Analysis Phoenix has established itself as a major market for cloud computing, and nearly every major hyperscale platform and wholesale data center developer has lined up land for future capacity in Greater Phoenix. The region is positioned for continued data center expansion, and the pace and location of that growth will be guided by deployment trends for large customers, especially regarding how they position their capacity and availability zones. 2000 1500 10.5% Vacancy 4Q 2020 1000 Power (MW) 500 10.1 MW Absorption 4Q 2020 0 1Q20 2Q20 3Q20 4Q20 1Q20 2Q20 3Q20 4Q20 1Q20 2Q20 3Q20 4Q20 1Q20 2Q20 3Q20 4Q20 Commissioned Available Under Construction Planned Source: datacenterHawk Phoenix has become one of the most dynamic The Greater Phoenix market had 43.5 MWs of leasing data center growth markets in the U.S. Users have in 2020, up slightly from about 35 MWs in annual long sought space in Phoenix as an alternative to absorption through 2018-19 and about 24 MWs California locations with higher cost and disaster risk. in 2016-7. The leasing activity in 2020 included 6.3 MWs of absorption in 3Q and 10.1 MW in 4Q. Phoenix has now become a data center destination in its own right, attracting a larger concentration of both customers and service providers in the process. The most extraordinary data point for It is positioned for additional growth as customers the Phoenix market is the planned future continue to seek alternatives to California due to capacity, which is now approximately recent changes in its risk profile. 1.6 gigawatts (GWs) of power and nearly The Phoenix market is home to 1.97 million square 8.8 million SF of space. feet (SF) of commissioned data center space, representing 295 megawatts (MW) of commissioned power at the end of 2020, according to market At present, data center supply and demand research from datacenterHawk. That makes Phoenix remain in balance, as the region’s vacancy rate the fifth-largest market for data center capacity in of 10.5 percent is only slightly higher than the the U.S., trailing Northern Virginia, Silicon Valley, 2018 rate of 9.4 percent. Given the enormous Dallas and Chicago. volume of future capacity planned for the Phoenix area, this suggests that developers are staying The most extraordinary data point for the Phoenix disciplined in their deployment timelines. At the market is the planned future capacity, which is now end of 2020, there was 31 MW of commissioned approximately 1.6 gigawatts (GWs) of power and space available in the Phoenix market, and about nearly 8.8 million SF of space. What’s less clear is 12 MW of new capacity under construction. the timing of when these data centers will be built and leased. © 2021 Data Center Frontier 3 Phoenix Market SPECIAL REPORT A key factor is whether providers are able to As Lee McPheters, research professor of economics successfully pre-lease space, or opt to build new at Arizona State University noted in his 2020 projects on speculation in order to have inventory economic outlook for Arizona, the state has available for large deals – a strategy which is more rebounded to pre-2007 conditions, employing common in highly competitive markets. 2.93 million people, with over 80,000 new jobs created in 2019. That’s the highest employment The list of companies with projects planned for Arizona has seen since October 2007. Phoenix is lengthy. In the Eastern suburb of Mesa, EdgeCore is online with its first building and new capacity is planned by Digital Realty, CyrusOne, Power cost is a critical decision point for NTT Global Data Centers Americas and EdgeConneX. both data center providers and users, and To the West of Downtown, Compass Datacenters, the difference of a few cents per kilowatt Stream Data Centers, Microsoft, STACK Infrastructure and Vantage Data Centers all have outlined plans for can mean millions of dollars saved for data projects in Goodyear. center transactions. There are several key trends to watch in the Phoenix market in 2021. These include attitudes on the Phoenix is the primary contributing factor to “build or buy” question, the emergence of competing Arizona’s economic growth, with 92% of new Arizona “data center districts” in Mesa and Goodyear, and jobs coming from Phoenix. As such, the Phoenix data how the course of the COVID-19 pandemic and center market has seen similar growth in the last recovery influence cloud deployment patterns. several years, growing by more than 135 MW We will examine these topics in depth, but first, of commissioned power since 2015. it’s important to understand the fundamentals The Phoenix market benefits from its reasonably of the Phoenix market and why it has become a low power cost, especially when compared to the magnet for data center development. highly-occupied Northern California and Los Angeles WHAT’S HOT ABOUT PHOENIX? data center markets, where there is a significant price difference. Power cost is a critical decision Phoenix offers data center customers and site point for both data center providers and users, and selectors users a combination of compelling benefits. the difference of a few cents per kilowatt can mean These include: millions of dollars saved for data center transactions. 1. Low Natural Disaster Risk In addition, Phoenix is viewed as a disaster recovery The city has almost no history of damage market specifically tied to its low threat for natural associated with seismic, tornado, and disasters. For example, according to the United flooding events States Geological Survey, the city ranks on the lowest 2. Inexpensive Power Cost scale of earthquake threat. In addition, the threat A diverse fuel