Phoenix Ranks #3 in U.S. for Data Center Leasing Activity in 2021

Driven by demand from large cloud service providers, data center leasing activity in Phoenix set new records in 2021, according to a new report from CBRE.

Phoenix had 29.8 megawatts (MW) of net absorption in 2021, which was a 70% increase from 17.5 MW in 2020.

Phoenix’s data center market also grew significantly, with 48.1 MW of inventory added over the course of the year. As a result, vacancy increased from 6.7% to 11.9%, year-over-year. An additional 85.5 MW of under-construction inventory will help further alleviate supply concerns and make the market more attractive to cloud providers that typically require at least 5 MW of capacity.

“The metro Phoenix data center market continues to see significant interest from a variety of companies that are looking for space in Mesa, throughout central Phoenix and west to Goodyear,” said Phoenix-based Mark Krison, senior vice president, Data Center Solutions, CBRE. “With excellent fiber connectivity, low-risk of natural disasters and robust power availability, we should see continued strong demand.”

National Trends

CBRE’s latest North American Data Center Trends Report shows that there was 493.4 megawatts (MW) of net absorption in the seven primary U.S. data center markets in 2021, a 31% increase over 2019’s then-record level, and up 50% from 2020.

Despite a 17% year-over-year increase in primary-market inventory, vacancy fell to just 7.2%. Occupiers in need of data center capacity in markets with low vacancy should see more options in 2022 with 727.6 MW of facilities under construction. However, 44% of this space has been preleased.

“We expect continued strong data center demand from cloud service providers and social media companies in 2022, particularly for large-scale, single-tenant facilities, as these firms race to build out metaverse and other digital communities,” said Pat Lynch, Executive Managing Director, Data Center Solutions, CBRE. “The continued adoption of autonomous vehicles, 5G infrastructure, and blockchain technology will also further fuel the data center real estate market in 2022 and beyond.”

Top U.S. Data Center Markets

Northern Virginia remained the most active data center market with net absorption of 303.3 MW in 2021 – more than four times that of Atlanta, the second-most-active market.

Looking ahead, Northern Virginia has the largest under-construction pipeline, at 239 MW. Other markets with significant construction under way include Hillsboro, Oregon (234.8 MW); Atlanta (160.5 MW); Silicon Valley (94.6 MW); Phoenix (85.5 MW); and Dallas/Ft. Worth (75.8 MW).

To download the report, click here.

*The seven primary U.S. data center markets are Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix, New York Tri-State and Atlanta.