Phoenix is the sixth largest data center market in the country based on impressive leasing activity in the southwest city over the past year. Research by CBREThe company, which was ranked among the best data centers in the country, found Phoenix’s absorption increased 38% over the past year, while the vacancy rate fell to 6.7%, its lowest level since 2016.
“Demand for leasing has increased for a combination of reasons that created a perfect storm. The expansion of 5G, but also the broad experience from home, contributed to an increase in the demand for data centers. Between the public and private clouds, where organizations try to expand storage and performance to meet internal demand, data centers have been in high demand. ” Mark Krison, SVP at CBRE, tells GlobeSt.com. “We expected robust demand from businesses, but COVID and its impact have increased it exponentially.”
The activity is particularly impressive when you consider that 9 MW of new offering was launched last year. However, the supply stabilized prices, which remained at $ 115 per MW. This will likely lead to a continuation of activities in 2021. “The activities were good for pricing from the end-user and tenant perspective. The owners are now very aggressive and rents have stabilized. So tenants will see good rental opportunities in the future, ”says Krison.
The activity has also resulted in increased investments and developments in the market. In general, this development offers tailor-made possibilities. “We have developers who build new data centers for third party leasing and those who buy leased data centers similar to an office building. However, there are very few data centers that are offered for sale as rental properties, ”says Krison. “What we’ve seen here in our region over the past 24 months is demand from new developers buying land and building data centers.”
The data center’s growth during the pandemic was merely an acceleration of existing trends, and Krison expects the momentum to continue through 2021. “The outlook is positive at both national and regional levels. The industry has grown in double digits over the past 10 years, ”he says. “It will probably stay that way. Phoenix, in particular, is popular on the west coast for the lack of quality data center space, and the sales tax cut for companies spending more than $ 25 million has benefited the state’s new business. “
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