Phoenix was the second-most active market in data center leasing in the U.S. in 2018 — ahead of metros such as Dallas-Fort Worth and Silicon Valley — driven by increased demand from cloud and enterprise users, according to CBRE’s latest U.S. Data Center Trends Report. 

Phoenix registered 41.6 megawatts (MW) of net absorption, up more than 580 percent compared to 2017, and a record level. With 46 MW of new space completed in 2018, the market also had the third-most new supply behind Northern Virginia (167.8 MW) and Dallas/Ft. Worth (53.2 MW). Despite the new supply, the wholesale vacancy rate ended 2018 at 7.8 percent, nearing a two-year low. Phoenix also has the second-highest level of under-construction inventory, following Northern Virginia (336.9 MW), with 71.4 MW under development and another 240 MW planned. Phoenix’s under-construction inventory is followed by Dallas-Fort Worth (37.4 MW), Houston (23 MW) and Atlanta (20.9 MW). 

“As the demand for data storage continues to increase with the rollout of 5G and A.I. technologies, Phoenix remains an attractive option for providers given the region’s excellent power capabilities, a competitive tax incentives program and favorite climate and geographic conditions,” said Mark Krison, senior vice president with CBRE. “This rapid increase in Phoenix’s data center inventory allows users to expand within the market more freely and accommodates the surge in hyperscale and enterprise cloud providers seeking to enter the market.” 

National Trends 

The seven primary U.S. data center markets saw 303 MW of net absorption in 2018, up more than 16 percent from 2017’s then-record total. That absorption nearly eclipsed the 322 MW of capacity added last year. Northern Virginia, the largest data center market in the world, accounted for 58 percent of net absorption in the primary markets. 

“We are closely watching supply and demand trends across the U.S. data center market in 2019 and beyond, particularly as data consumption—driven by the adoption of big-data analytics, 5G, gaming, streaming services, edge computing and the internet of things—continues to drive growth,” said Pat Lynch, senior managing director, Data Center Solutions, CBRE. “Meanwhile, we’ve seen robust construction activity as operators try to position themselves to rapidly deliver facilities within users’ often-tight schedules.”