Here’s Why Metro Phoenix is Now The Biggest Data Center Hub in the Western US

Article originally posted on AZ Central on March 4, 2024

All of the big computers and related equipment that businesses rely on to manage their operations have to go somewhere, and they are increasingly being installed around metro Phoenix.

Metro Phoenix now ranks first in the western United States and second nationally for data centers, according to a new report by commercial real estate brokers Cushman & Wakefield.

The rankings are based on data-center capacity, expressed in megawatts of electricity. Data centers house servers, networking equipment and other apparatus, usually in unobtrusive, nondescript buildings.

The centers around metro Phoenix also have a relatively low vacancy rate, in terms of unused power capacity, of 2.1%. That compares to about 5% nationally, said Jacob Albers, who heads Cushman & Wakefield’s data center research group.

“Phoenix has always been one of the upper-tier data-center areas, but growth over the past 18 months has been especially rapid,” said Albers, who co-authored the report. “All of the major players have a footprint there,” he said in an interview.

Some of these facilities are run by familiar tech titans including Google and Meta Platforms, the parent of Facebook, while others are “colocation” centers where a third party leases space to multiple business users.

Lots of available industrial land

Much of the new construction of data centers has occurred on the periphery of metro Phoenix in places including Goodyear, Waddell, Chandler and especially east Mesa. “Data centers don’t need to be smack-dab in the middle of population centers,” Albers noted.

Much of this growth here has been driven by the availability of land zoned for industrial use, especially as space is much more constrained in Silicon Valley, Albers said.

In general, industry growth for data centers has been fueled by increased technology usage, especially involving cloud computing and artificial intelligence.

Helped by an adequate power grid, available land and a sophisticated workforce, the Phoenix area now has one of the largest concentration of data centers in the Western Hemisphere, not just in the U.S. West, according to the report. Along with land and adequate power, the availability of fiber capacity and high-transmission power lines also helps, Albers added.

The Cushman & Wakefield report identifies eight primary data center hubs in the U.S. In addition to metro Phoenix, the others are in Atlanta, Chicago, Dallas, northern Virginia and Silicon Valley in California, along with Columbus, Ohio, and Portland, Oregon. The Phoenix hub is now the second largest nationally, trailing only northern Virginia with its concentration of government-oriented centers.

Importance of ample power supplies

Metro Phoenix also has been greatly helped by having a diverse supply of energy provided by two large local utilities, Arizona Public Service and Salt River Project.

“In other markets where the power is provided by just one utility, if that utility is tapped out, it can mean delays for power delivery several years out,” Albers said.

In addition, as part of a national trend, some data center operators here are inking deals to procure electricity directly from third parties using wind, solar, battery storage, natural gas and other power sources. Arizona’s data centers largely rely on natural gas or nuclear from the Palo Verde Generating Station, yet private solar farms are increasingly entering the mix, according to the report.

Data centers also use a lot of water, especially to cool servers, and that might become a problem around the Valley down the road. To mitigate that risk, operators here increasingly are using recycled water or economizing in other ways, Albers said.

Data centers tend not to be major employers. Anywhere from 10 to 50 or so people might work at a facility, which includes a staff of technicians, engineers, maintenance employees and security, he said.

For the most part, it’s the machines that do the heavy lifting in this industry.