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LMS Dives into The Growing Data Center Market

Credit: Kristen Miraglia, BEX.

By Tasha Anderson for AZBEX

The latest topic in the BEX Leading Market Series found attendees gathered at SkySong in Scottsdale on Wednesday, November 13th to discuss the current state and future of the Data Center market.

After a few words from BEX President, Rebekah Morris on the upcoming Construction Activity Forecast event in January 2020, she dove right in to introduce moderator Kevin Connor, Vice President & Project Executive with SKANSKA, who then welcomed the speakers: Carl Beardsley, Brokerage & Capital Markets, JLL; JD Beatty, Economic Development Project Manager for the City of Mesa Office of Economic Development; and David Bentler, Economic Development Manager for Arizona Public Service.

What’s Going On?

Beardsley started things off by discussing what’s been going on in the Data Center market in the past few years up until now.

“Last year was a record year for absorption… we were second nationally, behind Virginia, at 51 megawatts (MW), which was a record year by far,” he said. “This year is a little bit slower but still, historically speaking it’s rather high.”

Beardsley noted that JLL tracked up to 31MW of absorption – megawatts being leased up – in 2019 in Phoenix.

“We’re seeing technology companies taking up big chunks of space, software companies and then financial services.”

The panelists went on to briefly discuss several projects happening throughout Arizona.

Beardsley touched on the Aligned Energy data center in North Phoenix. While approximately 40MW has been completed, he mentioned that another 90 +/- megawatts to be coming online within the next six to eight months.

He also noted Iron Mountain, who recently finished the first phase of construction on their data center in Central Phoenix, is expected to add another 48MW in their second phase; and QTS, who’s planning a data center northwest of Iron Mountain and has not yet broken ground on their facility but has completed their plans and renderings.

Bentler updated the attendees on data centers popping up in the West Valley, including Compass Data Centers, Vantage Data Centers and the Stream Data Centers Hyperscale Campus in Goodyear. Iron Point is also planning a facility around the Avondale, Goodyear border.

“Just two years ago that [West Valley] had zero, that had nothing going on as far as a data center and quite frankly we couldn’t get data centers to locate in the West Valley… we kind of broke that with Microsoft,” Bentler stated as he went on to list Microsoft’s three planned sites, two in Goodyear and one in El Mirage, totaling approximately 735KSF.

Beatty noted two major data center players in Chandler, CyrusOne and Digital Realty, who are both planning to bring facilities to Mesa.

“That Digital Realty site is about 57 ½ acres. It was actually originally purchased by Dupont Fabros back in May 2017 and Dupont about a month later was acquired by Digital. So that kind of put some pause on the plans for that site… and they’re starting to move forward right now actually in kind of their pre-construction process,” he said. He went on to say that a construction timeline is not known right now.

Beatty also mentioned EdgeConnex to the east, who has “come through with their first phase plans for a 180KSF building.” There is no construction timeline yet on that facility as well.

Benefits

The panelists discussed a few key benefits to the community by bringing data centers to the valley as well as benefits to the data center companies coming to Phoenix.

“One of the biggest direct benefits to a community that data centers bring is sales tax off of electricity,” said Beatty. “a 100MWload factor is about $1M directly to the city in revenue which is a huge revenue stream for just a single site.”

Bentler agreed with Beatty and added that there will continue to be a lot of construction activity because they will always be upgrading and repairing their facilities, and yet there won’t be a strain on public safety or infrastructure.

Beardsley added another benefit saying that it would help drive the businesses of those who want to supply the large data centers like Microsoft. “They want to manufacture in Phoenix, they want to be on the same block as Microsoft.”

Benefits to the data centers themselves include tax incentives, less expensive power and ready-to-build sites, such as Mesa’s Elliott Road Technology Corridor.

“In addition to power… it’s the most important piece of infrastructure, it’s also water, it’s sewer, it’s road network, it’s telecom fiber and we have all that in place, so that’s really what drives a lot of the interest in the tech corridor is when a group comes to us, they don’t have to pull fiber five miles or waterlines two miles,” said Beatty.

Speaking of Water…

One of the biggest questions when the flood of data centers was announced was, “Is there enough water?” The panelists helped answer that question for the attendees.

“These can use a lot of water,” said Bentler. “There’s different technologies and… they’re working on that extremely hard right now to cut back on their water use.”

“Luckily, a lot of data centers are air cooled,” explained Beatty. “So, they basically take the initial charge of a fairly large amount of water and then they really don’t need anymore water after that, or very little.”

However, according to Beatty, there are large enterprise groups that still use water-cooled solutions for their facilities because it’s the most economical solution.

2020 Predictions

The panelists seemed to all be in agreement that Arizona will continue to see growth in the Data Center market in the future.

“When you get an Apple, a Microsoft, a Google, it’s a trickle-down effect,” said Beardsley. “I think we’re going to continue to be a top five national market in the data center sector.”

Bentler noted the shift in data centers moving from California to Arizona due to the price of power in California and how that shift is likely to continue.

“We are on the map big time now,” he stated.

Beatty touched on a higher rise in co-locations in the near future because they have taken more time to get off the ground.

The next Leading Market Series topic will be on Office and Industrial on December 5th. To check out 2020 dates and topics or to register for the next event, visit: http://bex-events.com/lms/

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