News Summary
Phoenix is becoming a key player in the U.S. data center market, ranking in the Top 10 for sales volume. With nearly 5 million square feet under construction, the city is set for significant growth, driven by tech giants aiming at efficient cooling and low operating costs. As demand skyrockets, innovations like closed-loop water systems are being adopted to address water shortages. The future appears bright for Phoenix, showcasing a vibrant market atmosphere fueled by rising lease rates and a robust technological landscape.
Phoenix Soars to New Heights in the Data Center Market
Phoenix is undeniably making headlines these days as it takes its place among the top spots for data centers in the United States. According to a recent report, this vibrant city has been ranked firmly in the Top 10 for data center sales volume, and it’s not hard to see why. The demand for data storage, cloud services, and artificial intelligence infrastructure is growing, and Phoenix is gearing up to meet that need.
The Booming Market
The latest report covers data center sales and construction from 2015 to 2024 across 94 U.S. markets, and it showcases an impressive surge in activity. Phoenix is rolling out nearly 5 million square feet of new data center space, which would boost its inventory by a remarkable 57% if completed. With major players like Meta and Vantage leading the way, the city is witnessing a construction boom that’s hard to ignore. As an example, Meta is in the process of building a massive 1.5-million-square-foot project in Mesa alone.
What Makes Phoenix Stand Out
There are several factors that make Phoenix a prime location for data centers. One major draw is its low operating costs and a dry climate that aids in efficient cooling—two aspects that every tech giant values when looking for new sites. Moreover, Phoenix’s proximity to West Coast hubs adds to its appeal. It creates an efficient route for data transmission and connectivity, essential for companies in the tech space.
To combat water shortages—a concern in many parts of Arizona—some developments are employing a closed-loop water system, which can reduce water usage by an impressive 95%. These innovative practices are crucial for sustainable development within the rapidly expanding data center landscape.
The Competitive Landscape
Phoenix is not the only city experiencing this surge in data center activity. Northern Virginia continues to be the heavyweight champ with nearly 6 million square feet of data center space under construction. However, its growth is constrained by a limited local grid and low available spaces, driving some developers to look toward more accessible locations like Fredericksburg and Springfield.
In addition, Atlanta has recently taken the crown as the top market for data center absorption, surpassing Northern Virginia in 2024. With more than 5 million square feet in development, Atlanta is benefiting from tax incentives and a local government that is eager to support tech growth.
Rising Demand and Records Broken
In the U.S., the data center market has recorded an astonishing $10.83 billion in sales over the past decade, with Phoenix playing a significant role. The city’s total data center inventory reached 602.8 megawatts (MW) in 2024, reflecting a considerable 67% year-over-year growth. The vacancy rate in the area has dropped to a record low of 1.9%, a clear indicator of the strong demand for space.
Lease rates in Phoenix are also among the highest in North America, ranging from $170 to $210 per kW/month. The combination of an ever-increasing demand for data services and the attractive incentives offered in the region is contributing to a vibrant market atmosphere.
The Future Looks Bright
As we move further into 2024, Phoenix can continue to expect a significant uptick in construction and leasing activity. The first half of the year alone marked a 34% increase in total supply within primary North American data center markets. With facilities like the recently acquired NTT Global Data Centers’ campus in southeast Mesa—which is set to include several state-of-the-art data halls—the city is laying a solid foundation for future growth.
So, for those keeping an eye on the tech landscape, Phoenix is the place to watch. With its innovative approaches, business-friendly climate, and towering ambitions, the city is well on its way to cementing itself as a powerhouse in the data center arena.
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Additional Resources
- AZ Big Media: Phoenix Ranks 4th Among North American Data Center Markets
- AZ Central: Mesa Getting 173-Acre Data Center
- Gov Tech: Arizonans Need Protection from Data Centers’ Impacts
- CBRE: Phoenix Moves Ahead of Silicon Valley in Data Center Inventory
- Wikipedia: Data Center
