Large Deals Drive Strong Data Center Growth in Phoenix in 2022

Phoenix saw 280 megawatts of data center capacity absorbed in the first six months of 2022, according to data from JLL, making it the strongest leasing market in North America in the first half of 2022. Phoenix edged out perennial leader Northern Virginia, which saw 257 megawatts of absorption.

The JLL data mark the first time in years that a region other than Northern Virginia had the strongest leasing. The JLL report stood out from other market research from this period in noting the exceptional growth in Phoenix. For example, data from CBRE had Phoenix third overall with 46 megawatts of absorption in H1 2022, trailing Northern Virginia (269 MW) and Silicon Valley (43.3 MWs).

Mark Bauer, the Managing Director for JLL’s Data Center Solutions Group in the Southwest, said the strong performance in Phoenix was driven by large customers seeking runway for growth.

“Much of the absorption was leasing by four or five hyperscale tenants with forward commitments,” Bauer said at the recent JLL Data Center Forum.  “Many are the second or third phase of existing campuses. There’s a growing trend of leasing multiple buildings to a single tenant.”

In 2021, Greater Phenix saw 26 MWs of absorption in the first half of the year and 150 MWs in the second half of the year. The stronger leasing in 2022 was a trend seen across the leading data center markets, as seen in this chart from JLL, which reflects the outsized demand seen this year:

In the second quarter, Phoenix’s vacancy rate dropped to 4.5%, the lowest it’s been since 1Q 2017, according to datacenterHawk. This is due in part to the record amount of demand that the market has seen over the past few quarters.

The Phoenix market is home to 2.6 million square feet (SF) of commissioned data center space, representing 458 megawatts (MW) of commissioned power at the end of the first quarter of 2022, according to market research from datacenterHawk. These metrics place Phoenix as a top five market for data center capacity in the U.S., joining Northern Virginia, Silicon Valley, Dallas and Chicago.

Users have long sought space in Phoenix as an alternative to California locations with higher cost and disaster risk. Phoenix has now become a data center destination in its own right, attracting a larger concentration of both customers and service providers in the process.

Two cities continue to see growth opportunities in the Phoenix market. In recent years, the vast majority of data center investment in Phoenix landed in the suburbs of Mesa and Goodyear. Current projects for those markets include 461 MW planned in Goodyear and 732 MW planned in Mesa.

 



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