The data center sector in Phoenix is on an impressive upswing, as evidenced by recent reports highlighting the city's substantial growth in the industry. Cushman & Wakefield pointed out that Phoenix sustained its position as a premier data center market in the nation, as the metro area witnessed a spike in colocation leasing activity, reaching 669 megawatts by the close of 2024, as per a Business Journal report.
The report discovered the colocation vacancy rate in Phoenix had dwindled to just 2.5% in the second half of the year, and notably, the city celebrated an 84% preleasing rate for data centers in the pipeline or under construction, however, in an adjacent report by CBRE, it was outlined that the Phoenix data center market's inventory surged to a hefty 602.8 megawatts, securing a fourth position among the primary North American data center markets, and the market capped off 2024 with a tight vacancy rate of 1.9%, which CBRE attributed to robust colocation leasing activity amounting to 245.5 megawatts, as detailed in AZ Big Media's coverage.
These metrics highlight the valley's demand for data, a demand that finds its roots in the expanding necessities of AI and digital services, with Mark Krison, an executive vice president at CBRE, noting, "The demand for data centers in Phoenix remains robust," and adding that the city observed "unprecedented growth" last year, as mentioned in the same article by AZ Big Media. The national landscape for data centers has equally been explosive, with an all-time high of 6,350.1 megawatts’ worth of construction underway in 2024—a 12-fold increase from what was seen in 2020, the data which CBRE's North American Data Center Trend Report delineated in full detail.
Other regions are expected to see significant growth due to better access to power, available land, and tax incentives. However, Phoenix stands out with 176.0 megawatts of under-construction inventory by the end of last year, highlighting the appeal of markets with lower power costs and fiscal benefits. The growth is driven by the ongoing impact of artificial intelligence on technology infrastructure and power consumption, which CBRE identifies as a key factor in site selection. This trend is likely to continue spreading across North Carolina, Northern Louisiana, Indiana, and established markets like Phoenix. Atlanta's impressive net absorption of 705.8 megawatts further underscores the rapid pace of development, as noted in CBRE's report.
