Menlo Equities to Redo Phoenix Office Park as Data Hub

Article originally posted on Globe St. on February 13, 2024

California-based Menlo Equities has proposed to replace a mostly vacant Phoenix office park with a 1.1M SF research and development hub that will combine data centers with R&D space.

The project, to be known as the East Thistle Data Center, envisions five buildings, each about 207K SF. Located on a 40-acre site in the Ahwatukee neighborhood in southeast Phoenix, the East Thistle hub was approved last month by the Ahwatukee Foothills Village Planning Committee, according to a report in the Phoenix Business Journal.

The East Thistle project is expecting to get final approval from the Phoenix City Council. Menlo Equities, based in Menlo Park in Silicon Valley, acquired the Phoenix site in 2015 in two transactions totaling about $53M. The site currently has four buildings on it, including a call center.

The Silicon Valley firm, which owns two other office and call center properties in Phoenix, is expanding the reach of its data center portfolio to encompass 19 data center campuses across the U.S., including the East Thistle project.

In 2021, Menlo Equities acquired 10 data centers from Digital Realty in a $581M deal.

Greater Phoenix has been a top-ten US data center cluster for nearly a decade, and nowhere in the Valley of the Sun have data centers been proliferating faster than in the Phoenix suburb of Mesa.

In 2023, Google announced the start of construction on the first phase of a $600M data center campus on a 167-acre site in Mesa. Also announcing plans for data center campuses in Mesa were Novva Data Centers, EdgeConnex, EdgeCore and Edged Energy.

With more than 15 new data center projects ready to enter the data center pipeline in Mesa, city leaders had a bit of an epiphany in September and declared that the dwindling amount of industrial land available in the city can be put to better use.

After Google’s groundbreaking, several city officials told the Mesa Tribune that they want to tap the brakes on data center development in Mesa and make room for job-rich industries on the remaining industrial land in the city.

“I believe we’ve seen more than our fair share of those data centers,” Scott Somers, a city council member who represents an area filled with data centers, told the newspaper.

“I’m concerned that what makes the Elliot Road Tech Corridor so valuable, like water availability, increased infrastructure when it comes to power, fiber optic cables—all are being eaten up by a single sector that doesn’t provide a lot of jobs,” Somers said.

Water conservation has become a huge concern in the Phoenix area as groundwater reserves have become depleted. New data center facilities in the Southwest are using waterless cooling systems.

“Moving forward, we need to think in terms of how many jobs and what quality of jobs are we getting in Mesa per square foot of space used, per acre-foot of water used, per megawatt of power that’s going to be drawn, and try to increase our numbers,” Somers said, according to the Tribune report.