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    Home » Trends » Phoenix Market Continuing Rapid Data Center Expansion
    Trends

    Phoenix Market Continuing Rapid Data Center Expansion

    BEX StaffBy BEX StaffSeptember 10, 2024No Comments3 Mins Read
    Credit: DataBank
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    By CJ Jorgensen for AZBEX

    Phoenix is continuing its rapid expansion in the data center market, becoming a primary data center hotspot of the West.

    Information in the “Americas Data Center H1 2024 Update” released last week by Cushman & Wakefield, shows Phoenix has seen a rapid expansion of absorption within the past two years, having reached 411MW in 2022 and 600MW in 2023. Phoenix saw slightly more absorption in the first half of 2023, but this is likely due to limitations on the delivery of supply.

    Phoenix’s absorption in the first half of 2024 was 126MW with 367MW under construction. Phoenix has 957MW in operation with a colocation vacancy rate of 1.3%.

    Hyperscalers and colocation providers have been eagerly assessing land sites across the Valley. Both veteran providers and newer prospects are digging their roots deeper into the Phoenix area.

    Phoenix itself is in a unique environment that propels the process of becoming the West’s data center hotspot. “Phoenix’s location offers a distinct advantage by providing low latency connectivity from major tech metros on the West Coast to fast-growing markets in the Southwest,” Cushman & Wakefield reports. “With tight vacancy and many options when it comes to providers, Phoenix has quickly become the central data center hub along the West Coast”

    A specific issue for Phoenix-area data center development is the availability of water. Water-cooling technology is one of the most efficient ways to cool high temperatures from intensive AI/HPC workloads. Both state and local governments have tried to combat water overuse by incentivizing the use of air-cooling technologies.

    Energy is another benefit Phoenix brings to the table, notably renewable energy. While Phoenix already has an established power grid consisting of 52% natural gas and 45% nuclear, private solar panels have become increasingly prevalent.

    Even with the increase of available power sources, it continues to be an ongoing and significant issue in the expansion and creation of more data centers. This, however, is not exclusively limited to Phoenix, as it is one of the more common challenges data center developers are facing.

    As was discussed in the 2024 BEX Private Development Summit last month, utility providers Arizona Public Service and Salt River Project are working closely with customer firms across all markets—but most specifically data centers—to correctly assess and develop supply and delivery plans for current and projected future needs. (AZBEX, Aug. 9)

    While there are considerable limitations and obstacles, Cushman & Wakefieldis strongly positive about Phoenix’s momentum.

    Phoenix’s Place in the North American Market

    Overall, Phoenix is third in the country regarding overall stock levels with 2.9GW, which is about 15.7% of North America’s 18.5GW of operational capacity. Virginia holds the lead by a significant margin, carrying 13.2GW, or about 71.4%.

    Phoenix directly follows Atlanta’s 3.8GW in the data collected by C&W and is ahead of Chicago’s 2.4GW and Dallas’ 2.3GW.

    Dallas’ numbers in the first half of 2024 were quite similar to Phoenix’s. Dallas saw a slight edge in both absorption (163MW) and capacity under construction (637.5MW), but it also saw a colocation vacancy rate of 1.4%. Dallas’ operation number trailed at 848MW.

    Dallas’ 2023 absorption rates were just less than two-thirds of Phoenix’s, coming in at 386MW.

    Other western areas seeing an expansion are Portland + Eastern Oregon, Reno and Salt Lake City.

    2024 2024 BEX Private Development Summit Absorption air-cooling APS Arizona Public Service Atlanta colocation Cushman & Wakefield Dallas Data Center energy Expansion hyperscaler low latency connectivity market Natural Gas nuclear Phoenix Portland power delivery power demand Reno Salt Lake City Salt River Project solar panels SRP trends Virginia Water West Coast
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