GlobeSt.com: How has the Valley's office market growth increase the need for data centers?

Ortiz: Phoenix's office market outlook for 2015 continues to show signs of improvement, climbing out of the doldrums of 2010 with projected absorption of 3.2 million square feet for the full year, in part because of the boom in technology-based jobs which now total approximately 70,000. Despite the planned development of more than 1.3 million square feet of spec space coming to market in 2015, class A office rents are projected to increase another 4% to ~$25.00 per square foot full service gross. And while the rebound in asking rents particularly for class A space over the last 5 years seems to suggest a tipping point, office rents in Phoenix offer a compelling story for tech-based corporations looking to relocate their HQs from competing markets such as Austin ($46.00 psf), Boston ($50.98), Chicago ($40.30), Denver ($34.35), San Jose/ Silicon Valley ($37.20), Los Angeles ($39.76) and San Francisco ($62.00).

With regard to the need for data centers, corporations are seeing the value add for relocating staff and IT infrastructure to markets like Phoenix, which carry a lower TCO and latency times back to the coastal clients at an average less than 30 milliseconds. IT has evolved with the Internet and all things connected. The number of Internet devices just surpassed the world's population last year and is projected to increase to 50 billion devices by 2020, according to April 2015 Cisco market research. Whether the vertical is e-commerce, financials, social media or healthcare, corporations are realizing the savings achieved by relocating IT to markets like Arizona which can often singlehandedly pay for the office move. Markets like Denver, Dallas and Phoenix witnessed development activity increases of 37%, 29% and 56% respectively and by no coincidence, these markets are a witnessing double-digit growth on the data center side.

GlobeSt.com: Explain the trend of converting existing buildings to data centers.

Ortiz: Redevelopment opportunities are abundant in the Valley for several reasons: speed to market for developers looking to establish a market presence in a shortened window of time (less than nine months); the ability to gain potential incentives for up 20 years; and ready access to power and fiber which would have longer lead times in a traditional ground up data center project. An example of this is a ~365,000 multi-tenant, data center project located at 2900 South Diablo Way in Tempe. The property offers a strategic location, accredited roster of technology tenants, close proximity to Phoenix Sky Harbor International Airport and a redevelopment play for a 40,000-square-foot data center with immediate access to water, cooling, power and fiber. Colliers International is actively marketing this project to data center users and developers with a desire to make use of the building's robust existing infrastructure and fit out the space to meet their own IT topography.

GlobeSt.com: What are Arizona's natural attributes for the data center market?

Ortiz: Arizona has long been known for its abundant resources in energy relative to access natural gas, nuclear, coal, solar and hydro. The market's insulation from natural disasters such as tornados, floods, and earthquakes makes it the perfect environment for a data center. Ironically, the heat in Arizona and its low humidity provides an abundance of free cooling for up 65% of the year. Compared to markets such as California with higher utility rates and power usage effectiveness metrics, Arizona can yield millions of dollars in operational savings to an end user. When combined with an average utility rate of $0.07 /kwh in Arizona versus California at $0.13 / kwh, the change in PUE from 1.6 in CA to 1.35 for AZ would afford a single megawatt user ~$7.5 - $8.00 million dollars in savings over a 10-year period.