The Phoenix Data Center Market

The Phoenix Data Center Market

Many Phoenix businesses experienced challenges over the past five years, but data centers have been a success story in the market. Data center users and operators have been extremely active in Phoenix recently, spurring an increase in supply to meet the demand from users both in and out of the market. As Phoenix's business climate improved, opportunities and growth were created for data center users and operators from across the United States.

From a geographic perspective, most of the colocation data center providers are located in Phoenix proper and Chandler, AZ. The Phoenix market benefits from its reasonably low power cost, especially when compared to the highly-occupied Northern California and Los Angeles data center markets, where there is a significant price difference. Demand in Phoenix originates from companies in the market and companies outside that view the Phoenix market as a disaster recovery location. When compared to other major U.S. data center markets, Phoenix is very competitive as it relates to colocation rates, power cost, and tax incentive opportunities.

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Power Overview

Power costs in Arizona are well below the national average. Similar to the Los Angeles market, Phoenix is served by a public utility provider of power and water, the Salt River Project (SRP). An integrated utility, SRP provides electric generation, transmission, and distribution services in the Phoenix metro area. A privately-owned competing electric provider, Arizona Public Service (APS), serves most of the Phoenix market where data centers are clustered. Both SRP and APS offer a diverse fuel mix that includes renewable sources such as hydroelectric and solar. Phoenix's plentiful sunshine is a double-edged sword for the data center industry: It offers an almost year-round source of "green" energy (driving public and private investments in solar power infrastructure construction, largely to accommodate a major Apple manufacturing facility in the area) but also requires more electricity to cool data centers during the area's numerous days of over 100-degree Fahrenheit temperatures.

Connectivity Overview

Phoenix has good fiber infrastructure. CenturyLink, Electric Lightwave/Integra, Level 3, Sprint, XO, and Zayo all run long-haul fiber connections through Phoenix. Carriers such as ICFN, Syringa, Tru Com, and Windstream have developed locally-focused fiber networks. Municipal fiber is available in Mesa, AZ to serve the area's data centers.

Hazard Risk Overview

Phoenix is rated as a low risk for all types of natural disasters. Hurricane damage is non-existent, floods are uncommon, and there are no major fault lines to cause seismic events in the Phoenix market.

Phoenix DATA CENTER MARKET OPTIONS

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