Establish Mission-Critical Operations in Greater Phoenix
Greater Phoenix is the fifth-largest data center market in the U.S. With over 300 megawatts of existing inventory and an additional 250 megawatts of inventory planned for the near future, the market’s growth shows no signs of slowing down. Greater Phoenix continues to prove to be one of the top cities for data centers. As a result of its stable climate, Greater Phoenix offers the potential to reduce the amount of energy necessary to operate mission-critical operations. This, coupled with a low risk of natural disasters, make the region a prime location for mission-critical operations.
Data Centers Industry Report
Get our 21-page, in-depth report on the data center ecosystem in Greater Phoenix.
Reliable Infrastructure
Greater Phoenix has one of the most dependable electric grids in the nation with a low risk of natural disasters and a large network of fiber.
Advantageous Weather
The mild weather and low chance for natural disasters positions Greater Phoenix as a top choice for data centers.
Competitive Operating Costs
Operating costs for data centers in Phoenix are up to 41% lower than competing markets with competitive pricing on electricity. Arizona is a right-to-work state and offers substantially lower corporate income tax rates.
Economic Development Programs
Greater Phoenix offers sales tax and use tax exemptions for up to 20 years for data centers as well as $9,000 of corporate income tax credits per job. Additional depreciation also greatly reduces property tax liability.
Large Existing Cluster
Greater Phoenix is the fifth-largest market by inventory in megawatts, growing 61.6% since 2015. Colocations in the market include industry leaders such as Digital Realty Trust, CyrusOne, and Iron Mountain while enterprise users include Apple, GoDaddy and Microsoft.
Quality of Life
With the significantly lower cost of living across all major expenditures, Greater Phoenix offers shorter commute times for more free time and more than 300 days of sunshine annually.
Reliable Infrastructure
Reliable Power
With the second-most reliable power grid in the nation and highly rated electric utility providers, Arizona offers consistent power to data centers in the state. Greater Phoenix’s data center colocation industry has more than 300 megawatts of existing inventory and an additional 250 megawatts of inventory planned for the near future, a proactive approach to support continued growth in the market.
Environmental Resiliency
Over the last 10-year period, Arizona recorded only 33 total hours of natural disaster disturbances, a fraction of the downtime experienced by southwest neighbors California and Texas. Arizona also leads the nation in water management and conservation efforts, and because of the 1980 Groundwater Management Act, the state has the infrastructure to maintain a reliable, resilient water supply for existing and new data centers in the region.
Airline Connectivity & Access
Enjoy prime connectivity in Greater Phoenix with close proximity to southwest markets, the cross-border supply chain in Mexico, and air travel and commerce efficiency through multiple airports. Phoenix Sky Harbor International Airport alone offers over 1,200 daily domestic and international flights.
Download the full data centers industry analysis for more on Greater Phoenix infrastructure.
5th
Greater Phoenix is the fifth-largest data center market in the nation
Source: CBRE
13%
From 2015 to 2020, employment grew 13.0% in the Phoenix-Mesa-Scottsdale region, compared to the national growth rate of 3.1%
Source: Lightcast 2021 Q1
<1
Greater Phoenix power customers experience less than an hour of outage time per year, among lowest in the country
Source: Energy Information Administration
Advantageous Weather
Low Catastrophe Risk
Should a facility operate with direct evaporative cooling strategies, the data center can potentially operate up to 70% of the year without the use of chillers. With low catastrophic risk, Greater Phoenix is an ideal climate for mission-critical operations.
Source: SmithGroup
Benefits of Mild Weather
With cabinet arrangements using enclosed hot aisles, the region’s climate offers:
- Reduced chiller operations up to 40% of the year
- Free air side cooling up to 38% of the year
- Water side free cooling (or no chiller operation) up to 41% of the year
Source: SmithGroup
Due to the mild weather the majority of the year, Greater Phoenix creates the availability for economizer, or “free cooling” strategies, eliminating the need for expensive mechanical refrigeration.
Download the full industry analysis for more on data centers.
Competitive Operating Costs
Greater Phoenix boasts low operating costs compared to competitor markets and impressive tax incentives, making it the perfect location for data centers. Arizona has a very competitive tax rate and a mandated benefits environment compared to peer markets. Even with the highly competitive tax environment, there are several tax incentives that can be utilized to mitigate operating costs. Greater Phoenix is competitive when it comes to the cost of utilities compared to competitor markets as well.
Annual Operating Cost by Metro
The Annual Business Operating Cost Pro-forma below estimates the cost of running a typical data center business in competitor markets across a handful of major expense categories. Component and custom analyses to match your company’s operations can be provided upon request. Contact us to request a custom analysis for your business.
Data Center – Enterprise
| Metro |
Payroll |
Benefits |
Utilities |
Real Estate |
Property Tax |
Total Operating Cost |
Index |
|---|---|---|---|---|---|---|---|
Greater Phoenix |
$4,519,853 |
$1,054,250 |
$6,395,696 |
$7,259,828 |
$4,758,884* |
$23,988,510 |
100.0% |
Atlanta |
$4,760,622 |
$1,118,241 |
$4,680,269 |
$6,154,838 |
$3,402,278 |
$20,116,248 |
83.9% |
DallasFort Worth |
$4,916,517 |
$1,149,832 |
$4,418,295 |
$6,265,418 |
$5,918,476 |
$22,668,538 |
94.5% |
San Jose |
$6,074,164 |
$1,435,077 |
$7,934,234 |
$14,920,710 |
$3,455,480 |
$33,819,664 |
141.0% |
Washington DC-Arlington |
$5,364,446 |
$1,251,337 |
$6,522,466 |
$10,438,433 |
$6,143,801 |
$29,720,483 |
123.9% |
*The projected property tax of $4,758,884 in Greater Phoenix is set to decrease with the passage of HB2822.
Source: Applied Economics MetrocompTool, December 2020
Assumptions: $150,000,000 personal property investment; 300,000 square foot High Tech, Construction; 150 acres; Utilities (per month): Electricity: 20,000KW, 6,000,000KWh; Water/Wastewater: 500,000cf, 4 meter; 50 jobs (Bureau of Labor Statistics equivalent occupations)
HB2822: Tax Reduction to Benefit Data Centers
HB2822 reduces businesses’ tax burden by setting the full cash value of business and agricultural property at a fixed 2.5% of the property’s acquisition cost, rather than a depreciation schedule. This lowers the assessed value of the property and greatly reduces tax payments. Over a 10-year period, the personal property tax on a $500 million property would be just $2.4 million, a fraction of the nearly $51-million tax on standard depreciation. Below is a table comparing deprecation value of the property before and after the passage of the bill. Get more information here.
| Schedule | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 |
|---|---|---|---|---|---|---|---|---|---|---|
Previous (Pre-2022) |
22.5% |
35.7% |
45.0% |
51.1% |
53.4% |
47.0% |
36.0% |
24.0% |
12.0% |
2.5% |
Current (Since 2022) |
2.5% |
2.5% |
2.5% |
2.5% |
2.5% |
2.5% |
2.5% |
2.5% |
2.5% |
2.5% |
Economic Development Programs
Competitive Tax Environment
Arizona offers a highly competitive tax environment and incentive programs that can be utilized to mitigate operating costs. The state sales tax rate is only 8.6%, corporate income is taxed at 4.9% and unemployment insurance is only 2.0%.
Download the full data centers analysis for more on taxes and incentives.
Large Existing Cluster
Massive data centers that operate on a national and international level take advantage of the reliable power grid of Greater Phoenix. Both colocation and enterprise data centers call the region home.
Colocation Spaces
Thirty-eight colocation facilities make up Arizona’s operation core. Below are some major colocation players that operate in the region.
Enterprise Data Centers
In addition to the colocations, Greater Phoenix is home to some of the most prominent enterprise data centers in the world.
29
Data center providers in Arizona
42
Data centers
27
Cloud nodes
19
Disaster recovery and business continuity sites
Source: Datacenters.com
Quality of Life
Experience a vibrant lifestyle and diverse culture at an affordable cost of living.
Enjoy the outdoors with more than 300 days of sunshine, average temperatures of 75 degrees, convenient access to over 400 hiking trails and globally recognized sporting events. Take part in a vibrant arts and culture scene that includes prominent classical arts to public art to craft markets and a diverse range of music and cultural events. And, eat well with fresh farmers markets in every city, and globally recognized chefs and culinary experiences at your doorstep.
Calculate your savings
Select your annual income, monthly mortgage, healthcare and grocery costs to find how much you would save with a move to Greater Phoenix.
Austin
Dallas
Denver
Los Angeles
Portland
San Francisco
Seattle
Annual Income
Monthly Mortgage
Monthly Healthcare
Monthly Groceries
Total Annual Savings
$
Source: C2ER 2024 Q1 Cost of Living Analysis; Zillow Research August 2024
