Here’s why Metro Phoenix has become THE destination for data centers


One of the lasting effects of the pandemic has been the acceleration of technology adoption. What was once a benefit reserved for a few positions, platforms such as Zoom and Teams have shown that online video conferencing can bridge the physical distance between colleagues to facilitate working from home anywhere in the world. Internet skeptics who always wanted to check their account balance at a bank branch or who hadn’t indulged in the convenience of ordering packages from Amazon found themselves in a unique historic moment that forced them to embrace new behaviors that can persist as habits.

Granted, this trend of getting bigger chunks of everyday life onto a screen was in motion before the COVID-19 public health crisis, but the disruption it has caused has supercharged that trajectory.

READ ALSO: Meta Mesa Data Center to Expand to Over 2.5 Million Square Feet

Data centers are a key piece of infrastructure that makes it possible to have anything from a trampoline to takeaway food delivered with just the touch of a finger. These facilities enable much of modern life, from social media to keeping hospital records.

“With every advance in technology, we become more dependent on it, and so does the economy,” says Steven Zylstra, CEO of the Arizona Technology Council. “Every time you send an email, you store data somewhere, so you can retrieve that email whenever you want. The world now depends not only on the internet, but also on the infrastructure that supports internet.

Indeed, a recent CBRE survey found that “the strong appetite for data, fueled by the continued growth of cloud computing and social media, and the emergence of new technologies such as 5G and autonomous vehicles, is driving interest increased investors for data centers”. Growing demand for data is just one reason Greater Phoenix has seen an influx of data center development, with the same CBRE survey indicating investors put only Silicon Valley and Northern Virginia ahead. Phoenix Market.

Mark Bauer, managing director and co-leader of JLL’s Data Center Solutions group, says absorption rates in 2021 nearly tripled from the prior year. “[Phoenix] had 51 megawatts of absorption in 2020, and in 2021 we did 142 megawatts,” he says. “Many of our data center operators who had space no longer have any available. And it is now a race to build the next phase of data centers.

Getting new data centers off the ground is becoming increasingly difficult as the supply of available land in the region continues to dwindle.

“We are tied to a lot of the ongoing industrial development,” says Bauer. “Because of this, we find ourselves pushing the envelope in terms of cost per square foot. It used to be that if you had industrial land and wanted the highest price, you went to a data center developer. Now we are competing with other industrial developers for the ideal land.

Bauer notes that over the past three months or so, he’s seen prices double or even triple in some areas of the city. “Larger, centrally located rooms are selling for a price we’ve never seen before in Phoenix, in the range of $30 to $40 per square foot for industrial land. At East Mesa, Goodyear, and Glendale, you could buy for $5 or $6 a square foot a year ago, and now it’s approaching $10. There’s a rush right now for good land sites for data center developers,” he says.

Data centers aligned.

Stimulate investments

Many factors make Greater Phoenix an attractive location to develop data centers. The region’s stable power sources and low propensity to natural disasters translate into reliability for users. Stability and continuity of service are paramount for businesses where disruptions could mean millions of dollars lost or, depending on the operation, lives at risk.

For example, on October 4, 2021, MarketWatch reports that a six-hour Facebook outage cost the company approximately $164,000 per minute for a total of $60 million. Shares fell 4.9% in response, representing $47.3 billion in lost market capitalization.

People like Zylstra have also worked to make Arizona a reliable and friendly business environment. He was involved with a data center advocacy group that successfully lobbied to eliminate the sales tax that data centers pay on servers.

“A data center is a server farm. There are hundreds, if not thousands of them, and they are expensive equipment,” says Zylstra. “We have low property tax, low income tax, but pretty high sales tax here in Arizona. In the end, we were able to eliminate the sales tax on [servers]. Efforts have been made to transfer this same benefit to the software used in these data centers which have not yet succeeded. But that doesn’t mean we’re giving up. »

Zylstra also points to the 2011 House Bill of 2001, known as the Arizona Competitiveness Package, which made a series of legislative changes to make the Grand Canyon State more attractive, including reducing the corporate tax rate by 6 .97% to 4.9%.

“We are constantly trying to position Arizona as one of the best states to locate any type of technology company. Data centers are important because they bring big names to the valley,” says Zylstra. “Apple has brought a command center here, which is quite large. Microsoft has built three data centers in the West Valley. PayPal, American Express, AT&T – companies specializing in the creation and storage of data – have d huge data centers.

“Meta is now a member of the Technology Council, and they haven’t even completed a data center yet,” he continues. “We’ve helped connect Meta in the community to educational institutions and other people they need to know who are part of the ecosystem.”

On August 12, 2021, Meta announced plans to invest $800 million in the company’s first data center in Arizona. The Mesa-based project is expected to support more than 100 operational roles and 1,500 construction jobs. In a related press release, Rachel Peterson, vice president of data center strategy at Meta, said, “Mesa has emerged as a prime location for a number of reasons. It has excellent access to infrastructure, renewable energy development opportunities, strong construction and operating talent, and excellent community partners.

Future proof

Sustainability is at the forefront of Meta’s 960,000 square foot data center. According to the company, Meta plans to restore more than 200 million gallons of water annually to the Colorado River and Salt River basins to replenish more water than the data center will consume. He also claims that the Mesa facility will use at least 60% less water than the average data center.

Colette Moore, principal water planning analyst for the Salt River Project (SRP), explains that Meta’s data center will receive renewable water in the form of long-term storage credits from SRP’s joint venture. with the Gila River Indian community, Gila River Water Storage (GRWS).

“Thanks to GRWS, we take [the Gila River Indian Community’s] Water from the Colorado River that they don’t need for their reservations that year, and we store it underground, and that’s recognized as a long-term storage credit. It’s like putting a deposit in a bank,” she says. “For Meta, we actually had credits already stored under the Mesa City Water Service Area that were ready and available for use.”

Because the data center will purchase long-term storage credits from GRWS, it will not use any water rights from Mesa’s municipal supply for its operations. The water represented by these credits is renewable since it comes from a renewable surface water supply – the Colorado River – although it is stored and delivered through an underground water well.

“Data centers are somewhat water-intensive, but their technology is becoming more and more efficient,” says Moore. “The water they use is reused on site and then reused by the water supplier once it is discharged to them. In Arizona, we are very good at using and reusing every drop we can, because we recognize it as a vital resource.

Another avenue Meta will pursue sustainability is by committing to using 100% renewable energy for the Mesa facility, which will require 450 megawatts of electricity for its operations. To put this into context, one megawatt provides the electricity needs of approximately 225 homes, which means Meta’s Mesa data center will require the same amount of power as 101,250 residences.

As part of SRP’s goal to expand utility-scale solar resources to 2,025 megawatts by 2025, the utility announced the construction of three new solar power plants in the county of Pinal on August 12, 2021, which will produce a combined total of 500 megawatts of renewable energy. energy. The Meta data center will be the biggest taker, using 90% of the energy generated by the three solar plants.

Karla Moran, senior economic development analyst for SRP, says meeting the 450 megawatt load requirement through clean sources was a top priority for Meta.

“It was a deciding factor when [Meta] reviewed sites and their accessibility to help accelerate the integration of renewables into the system,” she says. “That was early on in the first part of our discussions with them. And they’re not alone, most large customers who have data centers are having similar conversations.”

Zylstra agrees, adding that Apple has also insisted that its power comes from its own sources and that other members of the Arizona Technology Council, such as PayPal and American Express, have similar goals for their centers. of existing data that they intend to reach by 2025 or sooner. Much of that pressure, he says, comes not from regulators, but from employees and investors — both of whom have a say in what these companies do from a social perspective.

“Despite the fact that the Arizona Corporation Commission would not set energy targets, all major energy providers – [Tuscon Electric Power], [Arizona Public Service] and SRP – have set targets that are in synergy with the international drive to be clean by 2050,” concludes Zylstra. “Increasingly, businesses are going to demand that their electricity come from clean sources. The free market is finally pushing it, and we’re all going to benefit because climate change is having real consequences in Arizona.


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