Phoenix Data Center Market Demand Driven by Economics, Incentives

Aug. 21, 2018
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.

We continue our series of stories on the leading geographic markets for data center space. Data Center Frontier is partnering with DatacenterHawk to provide in-depth market reports on each city we profile. This time, we explore the Phoenix data center market. The second entry in our four-part series covers the elements that are driving Phoenix data center market demand, as well as what’s hot about the Phoenix market. 

Download the full report.

Phoenix data center market demand 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. These market attributes enable Phoenix to compete for many small and large data center users as a possible location for their requirement.

Phoenix has attracted several Bitcoin companies to house their infrastructure with local colocation operators comfortable with the concept. These requirements typically have very low redundancy requirements and are priced accordingly.

Other companies consistently searching the Phoenix market include those in the e-commerce, financial, insurance, healthcare, and technology industries. The Phoenix market’s growing traction with enterprise customers could be seen in the evolution of IO Data Centers, which has historically been among the largest providers in the Phoenix market. IO opened a 500,000 SF facility in 2009, and gradually filled the huge data center with clients in finance, aerospace and technology, as well as Internet service providers.

In recent years, several hyperscale operators have leased space in Chandler, helping establish the Phoenix market as a destination for larger deals.

What’s Hot About Phoenix?

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 the area recently, and Phoenix data center market demand is growing, spurring an increase in supply for users both in and out of the market.

As the Phoenix business climate has improved, it has created opportunities and growth for data center users and operators from across the United States. Phoenix attracts data center users for the following reasons:

  • Low Natural Disaster Risk: The city has almost no history of damage associated with seismic, tornado, and flooding events.
  • Inexpensive Power Cost: A diverse fuel mix and competition from several power providers create a reliable and competitive power environment.
  • Tax Abatement Opportunities: Legislation passed in 2013 enhances the state’s ability to compete on large, national data center requirements.
  • Competitive Colocation/Cloud Environment Quality: colocation and cloud providers have invested significantly in Phoenix over the past few years, creating a competitive market for data center users.

This Data Center Frontier series focused on Phoenix data center growth will also cover the following topics for the area in the coming weeks:

Download the full Data Center Frontier “Phoenix Data Center Market” special report, courtesy of Iron Mountain

And for further coverage, check out Data Center Frontier’s page dedicated to the Phoenix Data Center Market, that will provide the latest stats and info on this quickly growing area that is becoming a leading market in the colocation industry. 

About the Author

Rich Miller

I write about the places where the Internet lives, telling the story of data centers and the people who build them. I founded Data Center Knowledge, the data center industry's leading news site. Now I'm exploring the future of cloud computing at Data Center Frontier.

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