Western Real Estate Business

SEP 2018

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

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78 • September 2018 • Western Real Estate Business www.REBusinessOnline.com PHOENIX'S EAST, WEST VALLEYS PRESENT NEW OPPORTUNITIES FOR DATA CENTERS There is also significant activity hap- pening in the land market, including interest by several of the nation's ma- jor enterprise users who are seeking 100 acres or more for the development of hyperscale data center campuses. This is similar to what we've seen in Virginia and Dallas, where entities es- tablished sites that can handle not only Day One deploy- ments but also meet the needs of future inventory develop- ment for a customer base that is offering them a clear roadmap for growth. This is exactly what's happening in Phoenix's far East Valley, where mar- ket newcomer EdgeConnex now owns 170 acres for development and Digital Realty owns land nearby (a result of its 2017 acquisition of Dupont Fabros). EdgeCore, another newcomer in the Phoenix market, has already started construction on its land in Mesa, with Phase I expected to be complete by the end of the year. Cyrus One has also expanded with- in Chandler's Price Road Corridor. The company recently added three new buildings totaling 180,000 square feet and 54 MW to its six-building campus here, with plans to expand by two more buildings starting in 2019. Looking toward future development, Cyrus One has planted a flag in the far East Valley as well. The company purchased 68 acres for a five-building campus slated to deliver 198 MW of critical IT power. Not to be outdone, the West Valley is also in play. In the past six months alone, a wave of data center interest has added a new dimension to this submarket — already known for its popularity among ecommerce and logistics users. There are as much as 500 acres under contract or in some stage of negotiation by major enter- prise users who are attracted to the area's swaths of construction-ready, attractively priced land, not to men- tion the West Valley's highly skilled, low-cost workforce in STEM-related industries. Power Play Moving into one of Phoenix's un- derdeveloped and emerging markets gives data center builders one other game-changing benefit: power. A large data center project requires an average of 50 to 100 or more MW. And while some pockets of Metro Phoenix are still well equipped to deliver this level of power, other densely popu- lated areas of the Valley are finding it challenging. In contrast, many of Phoenix's far- ther-out locations provide a strong electrical infrastructure and the re- quired bandwidth and speed that to- day's data center occupants demand. This power comes from APS (pre- dominantly serving the West Valley) and SRP (with a significant presence in the East Valley), and at an attrac- tive price. At present, power cost in Phoenix ranges from about $0.065 to $0.069 per kilowatt hour — almost 50 percent less than the $0.11 to $0.15 per kilowatt hour rate in California's Sili- con Valley. More to Come Government entities have been working in Phoenix for years to at- tract technology and data center com- panies, and their diligence is paying off. At present, there are 22 wholesale and retail colocation data centers op- erating in the market, and a little less than 20 percent of users are in the tech industry. Arizona's Computer Data Center Program adds to that strength, allow- ing eligible tenants to have sales and use taxes abated — a particular boon to companies currently operating in California. Add to this Phoenix's expanding transportation corridors and its rank in the top 10 for low catastrophic and natural disaster risk, and Phoenix re- mains a top option for data center de- velopers and hyperscale users. Mark Bauer, Managing Director, JLL DATA CENTERS from page 1 Aligned Energy's data center will feature 550,000 square feet on 55 acres in the Deer Valley submarket. Cyrus One purchased 68 acres for a five-building campus slated to deliver 198 MW of critical IT power in East Valley. QTS' Phoenix data center contains more than 380,000 square feet with 108,000 square feet of raised floor space. Bauer

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