Why Businesses Are Choosing Phoenix for Colocation
4 min read
The Phoenix area is home to one of the fastest growing data center markets. Within the last few years, it has become a go-to destination for colocation on the west coast. Many colocation operators, network providers and data center users are all being attracted to this emerging technology hub. Phoenix’s conducive business environment, strategic location, and capacity for long term expansion give it a unique competitive advantage when compared to more expensive alternatives such as California.
History of the Phoenix market
In its early stages, the data center landscape in Phoenix was much different to what it is today. Back in the 90s, most of the activity was divided between two small submarkets. One of them was based in the downtown area of Phoenix. There, 120 East Van Buren housed a premier carrier hotel and the Park Central Mall was used as a colocation site. The other submarket was located south east of the downtown district, near Sky Harbor Airport and Tempe. Many telecom providers chose set up their colocation and switch facilities there in order to take advantage of the favorable power and fiber infrastructure.
In 2007, I/O Data Centers established a 500,000 square foot facility just to the north of Sky Harbor Airport. It was the first data center facility of that magnitude to be built in Phoenix, and was eventually acquired by Iron Mountain Data Centers. Over time, with demand increasing for data center space, many colocation operators settled around the Sky Harbor Airport region. As the two main submarkets became more concentrated, major providers such as CyrusOne, Digital Realty and later on H5 Data Centers, established operations in Chandler, located to the south of Phoenix. More recently, the Deer Valley submarket to the north has also begun to receive an influx of data center operators. Aligned Data Centers and Flexential are two of the notable providers that have launched initiatives in that region.
Colocation in Phoenix today
Today, Phoenix is poised to become a market leader, with developers boasting of 707 MWs of capacity in works for the region. This is more than any other market in the US except for Northern Virginia. As of 2018 it was ranked the sixth largest data center market in the US, with an astounding 1.61 million square feet of designated data center space. Apart from its solid fiber infrastructure and competitive colocation options, there are several other factors which have contributed to the meteoric rise of the Phoenix as a data epicenter and tech hub. For one, its relatively low power costs make it a lot more attractive for businesses, especially when compared to competing markets in California, Denver and Salt Lake City.
Phoenix’s geography and climate support data center needs. The region’s main utility providers can utilize a mix of renewable resources including solar and hydroelectric power because of the local weather and surrounding areas. Still, it’s worth remembering that despite the fact that abundant sunshine in Phoenix is perfect to generate clean energy, it is also a primary cause higher data center cooling costs. Another noteworthy trait that makes the city such a competitive option is its low risk of natural disasters. There is little to no threat of seismic activity, flooding, hurricanes or tornadoes. Historically, the city has been almost unaffected by any of those occurrences which make it a preferred location for disaster recovery.
Arizona’s political establishment has also helped boost the region’s appeal by providing incentives for data center businesses through tax abatement opportunities. According to legislation passed in 2013, qualified data center owners, operators and clients are exempt from state, county and local taxes when purchasing data center equipment. This tax break is valid for ten years and data centers that meet the criteria for ‘sustainable redevelopment projects’ receive an additional ten-year waiver. With this type of incentive, a company can save millions of dollars in taxes over its lifetime and is surely one of the driving forces behind the surge in data center businesses within Phoenix.
The future looks bright for the Phoenix data center market as many are already allocating land and securing properties for continued development. In fact, QTS already has an 84-acre property to support its growth, while CyrusOne and Digital Realty have also acquired sizeable portions in Mesa for future expansion. More recently, Stream Data Centers has entered the Phoenix market by purchasing 157 acres to build a major data center campus. All these developments just help to reinforce the sheer potential of the district. For western US enterprises that need colocation or cloud services, there’s hardly a better option. Its sound infrastructure, low risk of disaster, tax incentives and low power costs all help to create an environment geared towards growth and expansion.
Find the right colocation facility in the Phoenix market to meet your needs using our data center sourcing and pricing tool or contact an advisor to develop a hybrid solution that includes Phoenix colocation.