Phoenix Leads Data Center Markets in New Demand

Phoenix is the hottest data center market in the US, measured in megawatts of net absorption, as overall US market absorption surges past the total demand in 2021, according to the latest Data Center Outlook report from JLL.

US market demand reached 1,087 MW in H1 2022, more than 95% of total demand in 2021. JLL attributed the surge to the adoption of hybrid work patterns and the ongoing explosion of streaming apps, as well as historically high pre-leasing activity.

“Hybrid work is here to stay, and there is no stopping the growth in personal usage of social media, online gaming and streaming applications,” JLL’s H1 2022 report said.

According to JLL, the exponential rise in demand for data processing facilities “continues to pose challenges for the availability of land and power, causing operators to look to new markets with more availability.”

The market that appears to be benefitting the most from these trends is Greater Phoenix, which topped the leaderboard in H1 2022 demand with 280 MW of absorption — more than 10 times the total absorption in the Phoenix market in 2021.

Northern Virginia’s absorption tally in H1 was 240 MW, followed by Seattle-Portland at 194 MW; Dallas-Fort Worth at 177 MW; Chicago at 99 MW; and Atlanta at 97 MW.

Northern Virginia is in no danger of giving up its crown as the largest data center hub measured in installed capacity — Northern Virginia’s pipeline under construction in H1 2022 topped 1,000 MW — but NIMBY backlash is an intensifying headwind against the development of new server farms in rural areas of Virginia.

Based on the H1 tally of projects under construction, Phoenix and Atlanta rapidly are emerging as long-term challengers to Northern Virginia’s data center hegemony. The 278 MW of new capacity under construction in Phoenix was second on the new supply list, outpacing 233 MW in Silicon Valley; Atlanta’s pipeline of 175 MW surged into fourth place.

The pace of data center growth in Phoenix and Atlanta is even more impressive in the year-over-year comparison with H1 2021 in JLL’s report: in the first half of last year, Greater Phoenix reported no new data centers under construction while Atlanta’s pipeline stood at only 30 MW.

Overall, new data center construction in the US in H1 2022, which totaled 1,913 MW, is three times more than the YOY total.

Labor shortages — construction job openings have outpaced hirings since the beginning of the year — and supply-chain disruptions continue to hamper data center deliveries in the US, a situation JLL says is likely to be exacerbated as the expansion the semiconductor manufacturing base ramps up in coming months.

JLL’s net absorption totals represent the amount of new multi-tenant data center square footage and power leased less the total amount of square footage and power no longer occupied between the current and last measurement periods.