Data center developers overhaul strategies as community backlash stalls Arizona projects

Article originally posted on Phoenix Business Journal on August 17, 2026

Data center developers are tweaking everything from their messaging to their designs while projects stall as backlash towards the facilities explodes across the Valley and the country.

While demand for capacity shows no sign of waning as the rush to create capacity for artificial intelligence – data center vacancy is at 1% nationally for the third year in a row – getting local communities on board is now the biggest obstacle for the industry, according to a new report from JLL.

More than 66 gigawatts of data center capacity are under construction in North America today, with about 2 gigawatts underway in Arizona, according to JLL’s report.

In Phoenix and neighboring cities, the entitlement process for new data centers is “infinitely harder” today than it was a year ago, according to Adam Baugh, partner at Withey Morris Baugh PLC, who counts data center developers among his clients.

Two major projects are currently facing delays just south of Phoenix in Pinal County.

Vermaland LLC’s La Osa Energy Center near the city of Eloy faced a last-minute wave of community opposition in May, pushing the firm to significantly reduce the project’s size. It’s now planning for an 11-building data center campus at a 3,300-acre site, instead of the 59-building campus originally proposed. That project will be back in the spotlight when it returns to the board for a vote at an August 26 meeting.

Project Midway, a proposed five-building, 1.25-million-square-foot data center campus on 215 acres also faces delays following a July 16 meeting. The county’s planning and zoning commission asked dozens of questions around power and the project’s potential impact on the grid before an attorney representing the developer asked for a continuance on the items indefinitely.

Attitude from cities shifts

Today’s less-welcoming attitude from municipalities is a sharp shift from a few years back when cities touted new data centers as a massive economic development opportunity and helped to get those projects off the ground, according to Jay Kramer, a transactional real estate attorney at Fennemore.

Now many have adopted new zoning ordinances targeting data centers and restricting their development in certain areas. Gilbert is the latest working to adopt new rules.

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