Phoenix becomes a powerhouse in data center development

Above: Vantage Data Centers, a leading provider of wholesale data centers in North America, recently selected Goodyear, Arizona to build a mega-scale data center campus. The 50 acre project will be located at the southeast corner of Van Buren Street and Bullard Avenue and will encompass three data center buildings and office space. Real Estate | 21 May |

The whispers and hints of big things happening in the Phoenix data center market are now full-fledged roars and the market is no longer a sleeping giant. The giant has awoken.

The Phoenix area has exploded with data center development. In Goodyear alone, three companies — Stream Data Centers, Vantage Data Centers and Compass Datacenters — have announced plans to build data center campuses. All told, those campuses could house enough data storage units to use 600 megawatts of power. The size of a data center is measured by how much electricity is needed to power all of the servers that are housed in the facility, which typically hold tens of thousands of servers.

“There has been a little bit of a chatter for the past 18 months and a lot of that chatter has been that senior living is going to be hot for the next five years, and, oh, by the way, data centers as well,” said Kevin Somerville, Vice President of business development for Buesing Corp., a general contracting firm that does earthwork for the data center market. “If you look at our activity the last couple weeks, we’re touching five or six data centers the last few weeks. People are starting to build for real now.”

Goodyear has seen the biggest jump in data center activity, but Mesa and Chandler are also active markets. Heading into the fourth quarter of 2018, Arizona had 61.4 MW under construction, with another 120 MW in the pipeline.

The major reasons for this jump in data center activity are Arizona’s lack of natural disasters, affordable land, abundant and affordable power, and being located on major fiber optic transmission lines, which are vital to data center operations. Also, Arizona has a very pro-growth government, both locally and at the state level, which has been courting these kinds of high-value projects.

“The local economic development community has done a great job in promoting Arizona has a high-tech corridor spurring growth in Information Technology,” said Robert Sty, global director, tech sector for HDR, an engineering firm in Phoenix. “Similar to how the federal highway system enhanced transportation decades ago, data centers and the fiber network is the infrastructure that supports these advanced platforms – everything

from retail and business to self-driving vehicles, smart cities, and advanced manufacturing (Industry 4.0). To compete with other states for the data center market Arizona passed a tax exemption on qualifying data center equipment.”

“Working with the City of Mesa has been outstanding. They helped EdgeCore through the land entitlement process and made everything seamless to build in their city,” said Nick Pemper, senior project manager for Skanska USA, which is the general contractor on the EdgeCore Data Center campus on the old GM Proving Grounds in east Mesa. “They value the growth in their community and were excited to have EdgeCore be one of the first data centers in their technology corridor.”

The nature factor also can’t be downplayed. Power outages at data centers create major, sometimes worldwide disruptions. So, being located in an area with very few natural disasters greatly reduces the chances of outages.

In relation to that, reliable power is vital and the power companies like SRP and APS have been very cooperative with developers who are building data centers, building new substations in developments that house data centers to ensure enough power.

“Data centers need power and they need it in higher quantities than a typical warehouse or a grocery store and obviously the utility companies like that steady revenue and those big checks,” Somerville said. “So I think there is a relationship between the two and both figure out what they can do that makes sense for both sides.“

The amount of affordable land is also helping this current data center development. Pemper said his company is doing work in Virginia, the largest data center market in the nation, on a project similar to the EdgeCore facility in Mesa. He said the costs are three times as much as they are in Arizona.

“Arizona is still a relatively cheaper labor market compared to both the West and the East coasts,” Pemper said. “Also, the open desert landscape and the workable soils make earthwork and foundations relatively easy and fast. Speed to market is everything in the data center world.”

Speed is also important in terms of data transmission, and Phoenix is located on the “data highway” that runs throughout the country.

“Due to the geography of the Western U.S., fiber coming out of California moving east goes through Phoenix, Las Vegas, and Reno (on to Salt Lake City),” said Sty, “Phoenix is a natural ‘node point’ for data centers given our population and location on the national network.”

Top 10 most-active markets

1. Northern Virginia: 175.5 MW

2. Phoenix: 41.6 MW

3. Dallas-Fort Worth: 38.6 MW

4. Silicon Valley: 25.1 MW

5. Chicago: 10.7 MW

6. Southern California: 10.3 MW

7. Atlanta: 8.2 MW

8. Boston: 5.7 MW

9. Denver: 4.7 MW

10. Austin/San Antonio: 4.1 MW

 

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