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Q1 2020 Recap - Data Center Optimism Remains

Mark Bauer 05/04/2020

With data center activity still pushing forward, the current situation has caused a slowdown to select areas and providers. Overall, approximately 12 megawatts were absorbed throughout the quarter led by the lion’s share of Oracle, completing three different projects for a total of 10 megawatts throughout the Greater Phoenix area. Other notable users were on track to close throughout Q1 of 2020, however, those operators have chosen to push their closings to a later date in an effort to mitigate their existing situations.

Phoenix’s West Valley houses the current construction of Microsoft’s three data center locations, with Compass’ two locations, and Stream’s single location, all of which are still on track for delivery. Cyrus One’s Chandler campus also recently received the greenlight for their 7th building which will bring an additional 4.5 megawatts of availability. Of the 10 megawatts that were taken by Oracle this quarter, approximately 3 were reserved at Iron Mountain’s AZ-P2 campus, filling all currently available space. 20 extra megawatts are now being planned in their current commissioned space before moving dirt to construct Phase 2 of the building for an additional 24 megawatts.

In terms of outlook, both large and small businesses in Phoenix related to industries such as tourism have taken large hits throughout the last month, however, internet-based companies and internet usage have increased greatly, with Arizona seeing an 11.0% increase in downstream growth (downloaded data), and a 36.4% increase in upstream growth (data that is uploaded) since March 1st compared to the national average increase of 16.2% downstream and 34.3% upstream. With Phoenix extending its stay-at-home orders into May 15th these trends have a reasonable probability of remaining on an upward trend. When paired with the uncertainty of the near future, this could equate to an increase in data center demand throughout the country. Additionally, organizations may observe a newfound level of efficiency with all or most of their staff currently working from home. With most employees being more productive and satisfied as a result of working remotely, a large number of employees could shift towards remaining remote creating even more overall bandwidth usage.

Even with existing conditions, Phoenix continues to offer a relatively low cost of real estate and power alongside 365 days of disaster free weather. With that, the outlook of data centers is optimistic due to the eternal value and versatility physical colocation centers bring to today’s economy.

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