Driven by demand from cloud service providers and large tech companies, Phoenix saw the sixth-most data center leasing in North America in 2020, according to CBRE’s latest North American Data Center Trends Report.
Year-over-year net absorption in Phoenix was 17.5MW megawatts in 2020, up 38 percent from 2019, despite 9MW of new supply coming online last year. The metro’s vacancy rate of 6.7 percent at the end of last year is the lowest since 2016, while average asking lease rates remained steady in 2020 at $115.
Phoenix has seen increased demand for investment in and development of freestanding data centers with large enterprise customers looking throughout the metro area to purchase assets. Mesa, in particular, is in the midst of a development boom, with technology and cloud service companies purchasing 480 acres there in 2020 for data center construction. 28.1MW of supply is currently underway in the Phoenix area.
Data centers, one of the fastest growing real estate sectors pre-pandemic, remained strong in 2020 as businesses reconfigured their digital infrastructure to improve their remote work capabilities, and tech giants and cloud service providers raced to meet consumer and corporate demand.
CBRE’s latest data shows 329.6MW of net absorption in 2020 across the seven primary U.S. data center markets. While down 11 percent from the peak in 2019, 2020 absorption was still higher than any other year on record. Meanwhile, vacancy fell to just 8.5 percent, despite an 11 percent growth in new supply.
Strong demand and an uptick in investor interest in direct investment due to the strong performance of data center REITs in 2020 resulted in a 457.8MW data center construction pipeline in the primary markets, up 62 percent from the end of 2019. More than half of the current pipeline is pre-leased. (Source)